Telestone Technologies Reports Second Quarter Results


NEW YORK, Aug. 15, 2005 (PRIMEZONE) -- Telestone Technologies Corporation (AMEX:TST) today announced that, for the second quarter ended June 30, 2005, it achieved revenues of $4,404,000, a 14 percent increase on revenues of $3,869,000 for the same period a year ago. Telestone's net income for the 2005 second quarter was $784,000, or $.08 per fully diluted share, compared to net income of $1,443,000, or $.18 per fully diluted share, for the corresponding period in 2004.

For the first six months of 2005, Telestone achieved revenues of $7,937,000, a 6 percent increase on revenues of $7,511,000 for the first six months of 2004. Telestone's net income for the first half of 2005 was $1,643,000, or $.19 per fully diluted share, compared to net income of $4,725,000, or $.59 per fully diluted share, for the first half of 2004.

Six-month 2004 net income included an extraordinary gain of $2,773,000. Exclusive of this item, Telestone's net income for the six months ended June 30, 2004 was $1,952,000, or $.24 per fully diluted share.

Current assets at June 30, 2005 were $30.3 million with no long-term debt, and included cash and short term investments of $2.1 million.

Telestone's revenue growth in the second quarter of 2005 was primarily the result of increased wireless coverage solution business from China Unicom, as well as additional PHS (Personal Handyphone System) product and system integration service sales to China Netcom and China Telecom.

The company's decrease in quarterly earnings was primarily caused by increases in certain operating expenses, including a 33 percent rise in equipment and service expenses relating to the required appointment by Telestone of a third-party construction company on a $1.4 million wireless signal improvement service contract performed for China Unicom; a 45 percent increase in sales and marketing expenses primarily relating to the hiring of additional staff for four branch offices opened in January 2005; a 213 percent increase in general and administrative expenses relating to an allowance of $169,000 for doubtful accounts for long-outstanding receivables, and to a $171,000 professional fee paid in relation to Telestone's listing on AMEX in May 2005; and a 224 percent rise in research and development expenses relating to the development of 3G-related technologies and applications.

As of June 30, 2005, Telestone's accounts receivable totaled $23,248,000, compared to $21,019,000 as of March 31, 2005 and $19,845,000 as of December 31, 2004, representing increases of 11 percent and 17 percent, respectively. Despite these increases, Telestone has not experienced significant bad debt. Nevertheless, the company is taking additional measures designed to lower the turnover period of its accounts receivable balances, including but not limited to offering special discounts to certain debtors with prolonged balances. In addition, the company is exploring the possibility of obtaining third-party financing and other capital markets alternatives.

Looking forward, revenue growth is expected to be derived from a number of areas, including continued market expansion into underdeveloped provinces within the PRC, an increase in business from existing customers such as China Unicom and China Mobile in preparation for the awarding of 3G licenses, additional PHS contract awards, and further expansion into other nations in Southeast Asia. The company will also continue to explore opportunities in new markets in Western Asia, the Middle East and Eastern Europe.

Telestone Technologies Corporation is a leading provider of wireless technology coverage solutions and equipment to major telecom companies in the Peoples Republic of China. The company's solutions and equipment are applied in a variety of indoor and outdoor environments including hotels, residential estates, office buildings, airports, exhibition centers, underground stations, highways and tunnels. For additional information, please go to www.telestonetech.com.

SAFE HARBOR

Information in this news release may contain statements about future expectations, plans, prospects or performance of Telestone Technologies Corporation ("Telestone") that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. The words or phrases "can be," "expects," "may affect," "believed," "estimate," "project," and similar words and phrases are intended to identify such forward-looking statements. Telestone cautions you that any forward-looking information provided by or on behalf of Telestone is not a guarantee of future performance. Telestone's actual results may differ materially from those anticipated in such forward-looking statements as a result of various important factors, some of which are beyond Telestone's control, in addition to those discussed in Telestone's press releases, public filings, and statements by Telestone's management, including, but not limited to, Telestone's estimate of the sufficiency of its existing capital resources, Telestone's ability to raise additional capital to fund future operations, Telestone's ability to repay its existing indebtedness, the uncertainties involved in estimating market opportunities and, in identifying contracts which match Telestone's capability to be awarded contracts. All such forward-looking statements are current only as of the date on which such statements were made. Telestone does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.



  Consolidated Statement of Operations
                              
                             (Unaudited)              (Unaudited)
                          Three months ended         Six months ended
                               June 30,                 June 30,
                         ---------------------    --------------------
                            2005        2004         2005        2004
                          US$'000     US$'000      US$'000     US$'000
 Operating revenues
  Net sales of
   equipment                2,783       3,317        5,635       6,529
  Service income            1,621         552        2,302         982
                         --------     -------      -------     -------
                            4,404       3,869        7,937       7,511
                         --------     -------      -------     -------
 Operating expenses
  Equipment and
   services                 2,346       1,764        3,892       3,447
  Sales and
   marketing                  630         436        1,220         713
  General and
   administrative             445         142          916         449
  Research and
   development                146          45          154          80
  Depreciation
   and
   amortization                53          27           96          52
                         --------     -------      -------     -------
  Total operating
   expenses                 3,620       2,414        6,278       4,741
                         --------     -------      -------     -------
 Operating income             784       1,455        1,659       2,770
  Interest expense             (2)        (12)         (22)        (17)
  Other income, net             2          --            6          --
                         --------     -------      -------     -------
 Income before income 
  taxes, minority 
  interest and
  extraordinary item          784       1,443        1,643       2,753
 Income taxes                  --          --           --         433
                         --------     -------      -------     -------
 Income before minority
  interest and
  extraordinary item          784       1,443        1,643       2,320
  Minority interest            --          --           --        (368)
                         --------     -------      -------     -------
 Income before
  extraordinary 
  item                        784       1,443        1,643       1,952
  Extraordinary
   gain                        --          --           --       2,773
                         --------     -------      -------     -------
 Net income                   784       1,443        1,643       4,725
                         ========    ========      =======     =======

 Earnings per share:
 Weighted average
  number of shares
  outstanding
   Basic                8,528,590   8,000,106    8,420,393   8,000,106
   Dilutive
   effect of
   warrants               154,892          --      205,021          --
                         --------     -------      -------     -------
  Diluted               8,683,482   8,000,106    8,625,414   8,000,106
                       ==========  ==========   ==========  ==========

 Net income per share of common 
  stock
 Basic:
  Income before
   extraordinary
   gain                      0.08        0.18         0.20        0.24
                       ==========  ==========   ==========  ==========
   Net income                0.08        0.18         0.20        0.59
                       ==========  ==========   ==========  ==========

 Diluted:
  Income before
   extraordinary
   gain                      0.08        0.18         0.19        0.24
                       ==========  ==========   ==========  ==========
   Net  income               0.08        0.18         0.19        0.59
                       ==========  ==========   ==========  ==========


            

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