KHD Khd Humboldt Wedag International Ltd

- EPS increase by 71%; Order intake up 98%; Backlog tops $1.3 billion - HONG KONG, Aug. 13 /PRNewswire-FirstCall/ -- KHD Humboldt Wedag International Ltd. (NYSE:KHD) today announced results for the second quarter and six-months ended June 30, 2008. All dollar figures are in U.S. dollars. For the six months ended June 30, 2008, KHD reported revenues from continuing operations of $281.1 million and pro forma net income for the period was $32.5 million or $1.06 per share diluted, an EPS increase of 71 percent over the $18.8 million or $0.62 per share for the first six months of 2007. Pro forma net income excludes a non-cash charge of $5.4 million, net of income tax, for an unrealized loss on currency held in dollars in overseas banks, due to the rise in the value of the Euro compared to the dollar. Net income including this unrealized currency loss for the period was $27.1 million or $0.89 per share diluted. For a reconciliation of net income and pro forma net income, see the consolidated statements of income included on page 7. Revenue for the quarter ended June 30, 2008, was $144.2 million, a decrease over 2007 second-quarter revenues of $159.5 million. Pro forma net income for the period was $19.4 million or $0.63 per share diluted, an EPS increase of 85 percent over the $10.3 million or $0.34 per share for the first quarter of 2007. Pro forma net income excludes a non-cash gain of $0.2 million, net of income tax, for an unrealized gain on currency held in dollars in overseas banks, due to the decrease in the value of the Euro compared to the dollar. Net income including this unrealized currency gain for the period was $19.7 million or $0.64 per share diluted. For a reconciliation of net income and pro forma net income, see the consolidated statements of income included on page 8. Contact Information: Allen & Caron Inc. Joseph Allen (investors) 1 (212) 691-8087 or Brian Kennedy (media) 1 (212) 691-8087 Rene Randall KHD Humboldt Wedag International Ltd. 1 (604) 683-8286 ex 224 Order intake for the six months ended June 30, 2008 was $608.4 million, an increase of 98 percent over the first six months of 2007, with 57 percent of the first six months of 2008 order intake coming from the emerging markets of Russia and Eastern Europe and 30 percent from Asia. Order intake for the quarter ended June 30, 2008 was $320.1 million, an increase of 105 percent over second quarter 2007, with 53 percent of the second quarter 2008 order intake coming from the emerging markets of Russia and Eastern Europe and 31 percent from Asia. The Company's order backlog at June 30, 2008 was $1.3 billion, up 96 percent from the same period of 2007, with 41 percent from Russia and Eastern Europe, 26 percent from the Middle East and 26 percent from Asia. At June 30, 2008, the Company had $445.9 million in cash, cash equivalents, short-term cash deposits, and short-term securities. The current ratio was 1.60, and the long-term debt-to-equity ratio was 0.04. CEO Jim Busche commented, "Our gross profit margin for the six month period ended June 30, 2008 increased to 19.1 percent compared to 14.8 percent for the same period in 2007 and was 19.6 percent compared to 12.2 percent for the three months periods ended June 30, 2008 and 2007, respectively. There were several factors that contributed to the increase including more efficient project execution on a number of projects, cost savings related to the success of our global procurement initiative and the completion of warranty periods on several projects at better than historical levels resulting in the release of provisions on the expiration of these warranty periods." Jim continued, "We must continue to concentrate on execution, margins, converting the strong backlog into earnings and building the value of KHD in a risk prudent manner. We continue to build our capability and capacity to offer and successfully execute an expanded scope of services. The nature of the potential work and the location of certain opportunities result in a risk profile that could be higher than our traditional services. We continue to be selective in choosing which opportunities we have and will pursue with a renewed emphasis on value, margin and risk. Furthermore, we have and will continue to target higher margin projects on a global basis, rather than our historical practice of targeting the highest margin projects in a specific geography. We believe it is important our shareholders clearly understand our strategy and although a consequence of this strategy may be fewer mega-project awards compared to some of our competitors, the objective of our strategy is continued generation of quality earnings." Our guidance on order intake and earnings per share for the full year 2008 which we gave in our April 2, 2008 news release has not changed. For the year 2008, we expect order intake to increase to $1.1 billion and earnings per share to be in the range of $2.05 to $2.15 for the year. CFO Alan Hartslief commented, "We continue to hold $100 million of cash, earmarked for investment in growth, in dollars rather than in Euros. The recent appreciation of the dollar against the Euro, which significantly reduces the reported unrealized foreign exchange loss on these funds, illustrates the need from an economic perspective for KHD to hold cash in both US dollars and Euros". Alan further commented, "Our general and administrative expenses, excluding stock based compensation, increased to $26.6 million for the six- month period ended June 30, 2008 from $20.3 million in 2007 and for the three- month period ended June 30, 2008 it increased to $13.7 million from $10.8 million in 2007. A large proportion of our expenses are incurred in currencies other than the dollar; a weakening of the dollar therefore increases our reported expenses. General and administrative expenses increased for the six month period by approximately $2.9 million and for the three month period by $1.5 million, as a consequence of the weakening dollar. Additional costs, related to Wabush iron ore royalty arbitration, were also incurred. The remaining increase is primarily linked to the growth of administrative and supporting services for the expansion of business activities." Based upon the period average exchange rates for the six-month period ended June 30, 2008, the dollar decreased by approximately 13.1 percent in value against the Euro, compared to the period average exchange rates in 2007. As at June 30, 2008, it had decreased by approximately 7.3 percent against the Euro since December 31, 2007. We encourage our shareholders to read the entire Form 6-K, which has been filed with SEC, for a greater understanding of our company. The Form 6-K is also available on the Company website. Today at 10:00am EDT (7:00am PDT), a conference call will be held to review the Company's results; this call will be broadcast live over the Internet at http://www.khdhumboldt.com/ or http://www.earnings.com/. An online archive will be available immediately following the call and continue for seven days or to listen to the audio replay by phone, dial: 1 (888) 286 8010 using conference ID # 57651842. International callers should dial: 1 (617) 801 6888. The Form 6K has been filed with the SEC is available on KHD website. About KHD Humboldt Wedag International Ltd. KHD Humboldt Wedag International Ltd. owns companies that operate internationally in the industrial plant engineering and equipment supply industry, and specializes in the cement, coal and minerals processing industries. To obtain further information on the Company, please visit our website at http://www.khdhumboldt.com/ Disclaimer for Forward-Looking Information Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future growth, results of operations, performance and business prospects and opportunities. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in, the statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain assumptions. These assumptions, which include, management's current expectations estimates and assumptions about certain projects and the markets the Company operates in, are expressed or implied by the forward-looking statements, including, but not limited to: (1) a downturn in general economic conditions in Russia, Asia, Europe, the United States and internationally, (2) a decreased demand for the Company's products, (3) a decrease in the demand for cement, minerals and related products, (4) the number of competitors with competitively priced products and services, (5) product development or other initiatives by the Company's competitors,(6) shifts in industry capacity, (7) fluctuations in foreign exchange and interest rates, (8) fluctuations in availability and cost of raw materials or energy, (9) delays in the start of projects included in our forecasts, (10) delays in the implementation of projects included in our forecasts and disputes regarding the performance of our services, (11) the uncertainty of government regulation and politics in Russia, Asia and the Middle East and other markets, (12) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges, and (13) other factors beyond the Company's control. Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in our Form 6-K filed with the Securities and Exchange Commission and our MD&A filed with Canadian security regulators. - FINANCIAL TABLES FOLLOW - KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS June 30, 2008 and December 31, 2007 (unaudited) (U.S. Dollars in Thousands) ASSETS 2008 2007 Current assets Cash and cash equivalents $425,774 $354,397 Short-term cash deposits 8,466 0 Securities 11,693 15,510 Restricted cash 32,941 24,116 Accounts receivable, trade 76,189 62,074 Other receivables 26,573 18,585 Inventories 114,979 124,980 Contract deposits, prepaid and other 60,350 33,775 Future income tax assets 899 825 757,864 634,262 Non-current assets Property, plant and equipment 3,079 2,957 Interest in resource property 31,213 32,865 Equity method investments 586 654 Future income tax assets 22,655 24,658 Investment in preferred shares of former subsidiaries 89,207 91,960 Other non-current assets 2,921 1,955 149,661 155,049 $907,525 $789,311 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS (cont') June 30, 2008 and December 31, 2007 (unaudited) (U.S. Dollars in Thousands) 2008 2007 LIABILITIES Current liabilities Accounts payable and accrued expenses $157,558 $147,869 Long-term debt, current portion 321 0 Progress billing above costs and estimated earnings on uncompleted contracts 248,720 184,830 Advance payments received from customers 24,840 9,190 Income tax liabilities 9,007 20,658 Accrued pension liabilities, current portion 2,378 2,205 Provision for warranty costs, current portion 31,746 31,503 474,570 396,255 Long-term liabilities Long-term debt, less current portion 14,491 13,920 Accrued pension liabilities, less current portion 33,074 30,981 Provision for warranty costs, less current portion 11,376 11,799 Deferred credit, future income tax assets 12,627 15,712 Future income tax liability 8,937 2,593 Other long-term liabilities 5,666 4,931 86,171 79,936 Total liabilities 560,741 476,191 MINORITY INTERESTS 5,691 5,926 SHAREHOLDERS' EQUITY Common stock, without par value; authorized unlimited number 143,542 138,359 Treasury stock (93,793) (93,793) Contributed surplus 5,415 4,319 Retained earnings 189,734 162,633 Accumulated other comprehensive income 96,195 95,676 341,093 307,194 $907,525 $789,311 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF INCOME For Six Months Ended June 30, 2008 and 2007 (unaudited) (U.S. Dollars in Thousands, Except per Share Data) 2008 2007 Revenues $281,076 $266,452 Cost of revenues 227,537 226,919 Gross profit 53,539 39,533 Income from interest in resource property 14,194 7,176 General and administrative expense (26,563) (20,252) Stock-based compensation (2,126) (2,455) Operating income 39,044 24,002 Interest income 10,875 5,330 Interest expense (961) (1,559) Foreign currency transactions losses, net (9,021) (1,627) Other income (expenses), net (3,363) 3,418 Income before taxes from continuing operations 36,574 29,564 Provision for income taxes: Income taxes (6,106) (8,515) Resource property revenue taxes (3,091) (1,648) Income before minority interests, continuing operations 27,377 19,401 Minority interests (276) (1,002) Income from continuing operations 27,101 18,399 Income from discontinued operations, net of tax 0 350 Net income $27,101 $18,749 Net income under GAAP 27,101 18,749 Unrealized foreign currency translation loss on cash held for investment, net of income tax 5,393 0 Pro forma net income $32,494 $18,749 Diluted earnings per share continuing operations $0.89 $0.61 discontinued operations 0 0.01 $0.89 $0.62 Pro forma diluted earnings per share continuing operations $1.06 $0.61 discontinued operations 0 0.01 $1.06 $0.62 Weighted average of common shares outstanding - diluted 30,617,689 30,128,092 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF INCOME For Three Months Ended June 30, 2008 and 2007 (unaudited) (U.S. Dollars in Thousands, Except per Share Data) 2008 2007 Revenues $144,240 $159,544 Cost of revenues 115,908 140,139 Gross profit 28,332 19,405 Income from interest in resource property 10,228 5,622 General and administrative expense (13,718) (10,779) Stock-based compensation (1,063) (2,057) Operating income 23,779 12,191 Interest income 5,813 2,374 Interest expense (442) (715) Foreign currency transactions losses, net (596) (2,161) Other income (expenses), net (2,021) 2,442 Income before taxes from continuing operations 26,533 14,131 Provision for income taxes: Income taxes (4,415) (3,118) Resource property revenue taxes (2,215) (1,285) Income before minority interests, continuing operations 19,903 9,728 Minority interests (233) 556 Income from continuing operations 19,670 10,284 Income (loss) from discontinuing operations, net of tax 0 (15) Net income $19,670 $10,269 Net income under GAAP 19,670 10,269 Unrealized foreign currency translation loss on cash held for investment, net of income tax (240) 0 Pro forma net income $19,430 $10,269 Diluted earnings per share continuing operations $0.64 $0.34 discontinued operations 0.00 0 $0.64 $0.34 Pro forma diluted earnings per share continuing operations $0.63 $0.34 discontinued operations 0 0 $0.63 $0.34 Weighted average of common shares outstanding - diluted 30,707,222 30,398,992 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. FINANCIAL SUMMARY As of June 30, 2008 (unaudited) (U.S. Dollars in Thousands, Except per Share Data and Ratios) Cash, cash equivalents and short-term cash deposits $434,240 Short-term securities 11,693 Restricted cash 32,941 Working capital 283,294 Total assets 907,525 Shareholders' equity 341,093 Book value per share 11.18 Current ratio 1.60 Long-term debt to equity ratio 0.04 DATASOURCE: KHD Humboldt Wedag International Ltd. CONTACT: investors, Joseph Allen, , or media, Brian Kennedy, , both of Allen & Caron Inc., +1-212-691-8087, for KHD Humboldt Wedag International Ltd.; or Rene Randall of KHD Humboldt Wedag International Ltd., +1-604-683-8286 ex 224, Web site: http://www.khdhumboldt.com/

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