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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2009
Commission File Number 001-33134
| YUCHENG TECHNOLOGIES LIMITED |
| (Translation of registrant’s name into English) |
| |
F28 Tower B, Beijing Global Trade Center, 36 North Third Ring Road East, Dongcheng District Beijing, PRC 100013 |
| (Address of principal executive office) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ý Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _________
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _________
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No ý
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
82-_________
This Form 6-K consists of the following exhibits attached hereto:
1. Press release dated February 12, 2009, relating to Yucheng Technologies Reporting Unaudited Financial Results for the Three-Month Period Ended December 31, 2008 and the Fiscal Year 2008
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | YUCHENG TECHNOLOGIES LIMITED | |
| | | | |
| Date: February 12, 2009 | By: | /s/ Remington Hu | |
| | | Name: Remington Hu | |
| | | Title: Chief Financial Officer | |
| | | | |
__________________
* Print the name and title under the signature of the signing officer.
EXHIBIT
| Exhibit Number | Description |
| | |
| 1. | Press release dated February 12, 2009, relating to Yucheng Technologies Reporting Unaudited Financial Results for the Three-Month Period Ended December 31, 2008 and the Fiscal Year 2008 |
Yucheng Technologies Reports Unaudited Financial Results for the Three-Month Period Ended December 31, 2008 and the Fiscal Year 2008
BEIJING, February 12, 2009 /PRNewswire-Asia-FirstCall/ –– Yucheng Technologies Limited (NASDAQ: YTEC), a leading provider of IT solutions and services to China's banking industry, today announced unaudited financial results for the three-month period ended December 31, 2008 and the fiscal year 2008.
2008 Financial Highlights
| – | For the fiscal year 2008, non-GAAP net income was USD 13.6M, a 30.4% increase year-over-year. |
| – | Fully diluted non-GAAP EPS was USD 0.76 for fiscal year 2008 compared to USD 0.68 for fiscal year 2007, an 11.8% increase year-over-year. |
| – | Yucheng had a fourth quarter and year-end cash position of USD 35.1M compared to USD 30.5M for the same period last year. |
| – | Cash from operations was USD 21.3M in the fourth quarter 2008, which resulted in net operating cash of USD 15.8M for the fiscal year 2008, compared to a loss of USD 4.6M for the fiscal year 2007. |
| – | Days of sales outstanding were 106 days in the fourth quarter 2008 compared to 154 days in the third quarter 2008. |
Fiscal 2008 and fourth quarter results were achieved despite significant capital and operating investments in 2008, which will allow Yucheng to expand into the insurance sector via the Elegon JV, further penetrate into SMBs with our E-banking ASP, and capitalize on consumer spending patterns through our POS initiative. These investments lay new foundations to ensure long-term profitability and growth; however, at a cost of USD 0.11 per share for 2008. In 2009, Yucheng’s management team expects to execute on these initiatives to broaden revenue streams and continue double-digit top and bottom line growth.
Yucheng’s net income of USD 13.6M is higher than the original net income performance target established as part of the 2006 merger, which means that the selling shareholders from that transaction will be entitled to receive an additional 0.95M common shares after the financial statements are fully audited. However, the strong 30.4% annual net income growth fell short of management’s original target, due to the product mix skewing more heavily than expected towards System Integration in the last six weeks of 2008. In light of this shortfall, the executive management team, Mr. Weidong, Chairman and CEO, and Mr. Shuo Zeng, COO, will defer 125,000 shares or 55% of their 2008 performance target share allocation as selling shareholders until January 1, 2010, contingent on meeting the company’s net income guidance for 2009. Mr. Weidong and Mr. Shuo Zeng have also requested that the Board not to pay them any additional monetary reward for 2008 performance beyond their base salary of USD 50,000 each.
Mr. Hong said, “Since 2006, we have demonstrated year after year our ability to grow Yucheng and to move into higher margin solutions. We hold ourselves to a high standard, which is partly why we decided to list on the NASDAQ. Executive management is forgoing our 2008 bonuses and postponing a major portion of the performance-based shares due to us as selling shareholders to reflect our commitment to our existing shareholders and our confidence in the 2009 guidance despite challenging market conditions.”
The Company also announced changes to the Board. Mr. Chih Cheung will become Chairman Emeritus of Yucheng’s board of directors, and Mr. Hong will replace him as Chairman, as agreed during the 2006 merger. Mr. Cheung will continue to play a formal role and will be more active in shaping Yucheng’s strategic initiatives beyond its core business of IT Solutions and Services. Mr. Lawrence Yeung will be retiring from the board to move back to Australia. In his place, Mr. Jeffrey R. Williams will join the board as an independent director and serve on the audit committee of the board of directors.
“I would like to thank Mr. Yeung for his contributions as an independent director and look forward to Mr. Williams’ active involvement in corporate governance, investor communications, and strategic initiatives, working closely with Mr. Cheung,” said Mr. Hong.
Mr. Williams has over 25 years of experience in China, Hong Kong and Taiwan in the financial services industry. He currently serves as an independent director and risk management committee chair of China Universal Asset Management Co. Prior to that, Mr. Williams was the President of Shenzhen Development Bank, where he served as the first foreign president of a Chinese commercial bank. Prior to that, he held a number of senior executive positions at Citibank, American Express and Standard Chartered within Greater China. Mr. Williams received his AB, magna cum laude, from Harvard College and a MBA from Harvard Business School.
Business Outlook
Despite the current global financial and economic challenges and the general negative outlook for the Chinese economy, we believe that our growth will continue at a healthy rate of 18% to 23% in 2009. We are committed to growing our IT Solutions and Services business through our market leading products, which allow banks to serve customers more effectively and conveniently, and to manage their operations across multiple locations more efficiently.
We remain positive about our market prospects for another reason. Banks are continuing to consolidate, which requires IT investments to integrate disparate, legacy systems and to enjoy greater economies of scale. Banks are increasingly working with only the strongest IT players that have the breadth of skills and the high caliber products to ensure long-term success. For Yucheng, this means that we are in a position to benefit from industry consolidation.
Mr. Hong stated, “In 2009, we believe our core business will continue to grow, and we will begin to reap the rewards from our E-banking ASP, POS business, and our 3i Elegon JV investments in 2008 through recurring revenue models. We continue to see robust demand for our services across all of our business lines.”
Based on our operating results for 2008, we project our 2009 revenues to be in the range of USD 117M to USD122M. We expect our 2009 non-GAAP net income to be in the range of USD 16.0M to USD 16.7M, which will translate into net income per share of USD 0.86 to USD 0.90, based on expected 18.5 million diluted shares outstanding.
In addition to providing complete unaudited financial results on a consolidated basis, the table below allows greater insight into our POS business.
Summary of Selected Unaudited Financial Results for the Fourth Quarter of 2008
(Numbers are in USD thousands, except shares outstanding, earnings per share and percentages)
| | Q4 2008 | Q4 2007 |
| Amount | % of Revenues | Amount | % of Revenues | CONSOLIDATED Y-O-Y % Change |
| Revenues | $34,204 | 100.0% | $23,486 | 100.0% | 45.6% |
| IT Solutions and Services | $19,480 | 57.0% | $13,640 | 58.1% | 42.8% |
| System Integration | $13,939 | 40.7% | $9,846 | 41.9% | 41.6% |
| POS | $785 | 2.3% | - | - | - |
| Cost of Revenues | $21,879 | 64.0% | $14,694 | 62.6% | 48.9% |
| Gross Profit | $12,325 | 36.0% | $8,792 | 37.4% | 40.2% |
| Total Operating Expenses | $7,339 | 21.5% | $4,595 | 19.6% | 59.7% |
| R&D | $91 | 0.3% | $99 | 0.4% | -8.1% |
| SG&A | $7,249 | 21.2% | $4,496 | 19.1% | 61.2% |
| Income from Operations | $4,986 | 14.6% | $4,197 | 17.9% | 18.8% |
| Net Income (GAAP) | $4,745 | 13.9% | $3,865 | 16.5% | 22.8% |
| Amortization of Intangible Assets | $336 | 1.0% | $314 | 1.3% | 7.0% |
| Non-GAAP Net Income | $5,080 | 14.9% | $4,179 | 17.8% | 21.6% |
| Basic GAAP EPS | $0.27 | - | $0.23 | - | 17.4% |
| Diluted GAAP EPS | $0.27 | - | $0.22 | - | 22.7% |
| Basic Non-GAAP EPS | $0.29 | - | $0.25 | - | 16.0% |
| Diluted Non-GAAP EPS | $0.29 | - | $0.24 | - | 20.8% |
| Basic Weighted Average Common Shares Outstanding | 17,575,685 | - | 16,563,370 | - | 6.1% |
| Diluted Weighted Average Common Shares Outstanding | 17,614,543 | - | 17,778,250 | - | -0.9% |
| | Q4 2008 |
| | CORE | POS |
| | Amount | % of Revenues | Amount | % of Revenues |
| Revenues | $33,419 | 100.0% | $785 | 100.0% |
| IT Solutions and Services | $19,480 | 58.3% | - | - |
| System Integration | $13,939 | 41.7% | - | - |
| POS | - | - | $785 | 100.0% |
| Cost of Revenues | $21,386 | 64.0% | $493 | 62.8% |
| Gross Profit | $12,033 | 36.0% | $292 | 37.2% |
| Total Operating Expenses | $6,177 | 18.5% | $1,162 | 148.0% |
| R&D | $91 | 0.3% | - | - |
| SG&A | $6,087 | 18.2% | $1,162 | 148.0% |
| Income from Operations | $5,856 | 17.5% | ($870) | -110.8% |
| Net Income (GAAP) | $5,274 | 15.8% | ($529) | -67.3% |
| Amortization of Intangible Assets | $336 | 1.0% | - | - |
| Non-GAAP Net Income | $5,609 | 16.8% | ($529) | -67.3% |
| Basic GAAP EPS | $0.30 | - | ($0.03) | - |
| Diluted GAAP EPS | $0.30 | - | ($0.03) | - |
| Basic Non-GAAP EPS | $0.32 | - | ($0.03) | - |
| Diluted Non-GAAP EPS | $0.32 | - | ($0.03) | - |
| Basic Weighted Average Common Shares Outstanding | 17,575,685 | - | 17,575,685 | - |
| Diluted Weighted Average Common Shares Outstanding | 17,614,543 | - | 17,614,543 | - |
Note: The United States dollar amounts in the above table are calculated based on an exchange rate of USD 1.00 = RMB 6.8346 for December 31, 2008 and USD 1.00 = RMB 7.3046 for December 31, 2007.
Revenues: Yucheng reported consolidated revenues for the fourth quarter 2008 of USD 34.2M, a 45.6% increase compared to the fourth quarter of 2007 and a 45.1% increase compared to the third quarter of 2008.
| – | IT Solutions and Services: In the fourth quarter, IT Solutions and Services recorded revenues of USD 19.5M, a 42.8% increase compared to the fourth quarter of 2007, and a 73.4% increase compared to the third quarter of 2008. IT Solutions and Services accounted for 57.0% of consolidated revenues. |
| – | System Integration: System Integration revenues totaled USD 13.9M in the fourth quarter or 40.7% of consolidated revenues. System Integration revenues grew by 41.6% compared to the fourth quarter of 2007 and 19.0% compared to the third quarter of 2008. |
| – | POS: POS generated revenues of USD 0.8M in the fourth quarter, representing 2.3% of consolidated revenue. Our POS revenues increased 25.2% compared with the third quarter of 2008. |
Gross Profits: In the fourth quarter of 2008, Yucheng registered a gross profit of USD 12.3M, representing an increase of 40.2% compared to the fourth quarter of 2007 and 43.4% compared to the third quarter of 2008.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A was USD 7.2M in the fourth quarter of 2008, an increase of 61.2% compared to the fourth quarter of 2007 and 47.3% compared to the third quarter of 2008.
| – | Core: In the fourth quarter, IT Solutions and Services and System Integration SG&A expenses totaled USD 6.1M, an increase of 35.4% compared to the fourth quarter of 2007 and 44.1% compared to the third quarter of 2008. As expected, our SG&A increased in the fourth quarter due to annual auditing and legal fees as well as the other expenses related to being a public company. |
| – | POS: SG&A was USD 1.2M, an increase of 66.6% compared to the third quarter of 2008. The increase is a one-time charge, due to the reclassification of a sales expense. |
Net Income: Yucheng recorded non-GAAP net income of USD 5.1M, an increase of 21.6% compared to the fourth quarter of 2007 and 25.6% compared to the third quarter of 2008. GAAP net income was USD 4.7M for the quarter, an increase of 22.8% compared to the fourth quarter of 2007 and 28.0% compared to the third quarter of 2008.
Earnings per Share: In the fourth quarter, Yucheng’s EPS for fully diluted shares on a consolidated basis was USD 0.29 (non-GAAP) and USD 0.27 (GAAP) compared to USD 0.24 (non-GAAP) and USD 0.22 (GAAP) in the fourth quarter of 2007.
| – | Core: Fully diluted EPS for the fourth quarter grew to USD 0.32 (non-GAAP) and USD 0.30 (GAAP) compared to USD 0.24 (non-GAAP) and USD 0.22 (GAAP) in the fourth quarter of 2007. |
| – | POS: On both a GAAP and non-GAAP basis, the fully diluted EPS impact of POS in the fourth quarter was USD -0.03 compared to USD -0.01 in the third quarter of 2008. |
Cash: Yucheng’s cash position in the fourth quarter was USD 35.1M compared to USD 30.5M in the fourth quarter of 2007 and USD 18.8M in the third quarter of 2008. Yucheng’s operating cash flow peaked cyclically in the fourth quarter, generating USD 21.3M compared to USD 5.7M in the fourth quarter of 2007 and USD 0.5M in the third quarter of 2008.
Accounts Receivable: In the fourth quarter, accounts receivable totaled USD 42.0M compared to USD 27.9M in the fourth quarter of 2007 and USD 37.0M in the third quarter of 2008. Management continues to emphasize and regularly monitor the timely receipt of payments. Our days of sales outstanding declined to 106 days compared to 154 days in the third quarter of 2008.
POS: Yucheng’s POS business, although still nascent, has shown steady growth during 2008.
| – | Terminal Deployment: Our POS installed base grew to 21,300 by year-end compared to 17,600 in the third quarter of 2008, a 21.0% increase. We continue to focus on growing a highly accretive merchant base both in terms of transaction volume and revenue. |
| – | Average Monthly Gross Revenue per POS terminal (AMGRP): Our AMGRP across our entire installed base, which has held steadily above USD 12, since we started reporting the figure in the second quarter of 2008. As we look at the more mature terminals in our base, the results are promising and show some signs of achieving western averages. |
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), Yucheng’s management has reported net income and earning per share on a non-GAAP basis. Each of the terms as used by Yucheng is defined as follows:
Non-GAAP net income represents net income reported in accordance with GAAP, adjusted for amortization of intangible assets resulting from the accounting treatment of the acquisition of Beijing e-Channels Century Technology Co., Ltd.
Non-GAAP earnings per share represents non-GAAP net income divided by the number of shares used in computing basic and diluted earnings per share in accordance with GAAP.
Management of Yucheng believes that these non-GAAP net income and earnings per share measures are useful for understanding and assessing Yucheng’s underlying business performance and operating trends, and expects to report net income on a non-GAAP basis using a consistent method on a quarterly basis going forward. These non-GAAP financial measures also facilitate management’s internal comparisons to Yucheng’s historical performance and liquidity. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
Management of Yucheng notes that these measures may not be calculated on the same basis as similar measures used by other companies. Please find a reconciliation of non-GAAP figures to GAAP figures in the summary of financial information presented above.
Conference Call and Replay Information
Management will conduct a conference call to discuss the financial results for the three-month period ended December 31, 2008 and the fiscal year 2008 on Thursday, February 12, 2009 at 8:00AM EST/ 9:00PM BJT.
To participate, please dial one of the local access numbers, listed below, ten minutes prior to the scheduled start of the call. The conference call identification number is 80168828.
| US | +1 866 242 1388 |
| Canada | +1 888 447 3085 |
| UK | +44 808 234 7860 |
| China Netcom Users | +86 10 800 640 0084 |
| China Telecom Users | +86 10 800 264 0084 |
| All Other Participants | +61 288 236 760 |
A recording of the call will be accessible within 48 hours via Yucheng's website at http://www.yuchengtech.com/english/success.php?classid=41.
About Yucheng Technologies Limited
Yucheng Technologies Limited (NASDAQ: YTEC) is a leading IT service provider to the Chinese banking industry. Headquartered in Beijing, China, Yucheng services clients from its nationwide network in 23 cities and approximately 2,000 employees. Yucheng provides a comprehensive suite of IT solutions and services to Chinese banks including: (i) Channel Solutions, such as e-banking and call centers; (ii) Business Solutions, such as core banking systems and loan management; and (iii) Management Solutions, such as risk analytics and business intelligence. Yucheng is also a leading third-party provider of POS Merchant Acquiring Services in partnership with banks in China.
Safe Harbor Statement
This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward looking statements are statements that are not historical facts. Forward-looking statements generally can be identified by the use of forward looking terminology, such as ''may,'' ''will,'' ''expect,'' ''intend,'' ''estimate,'' ''anticipate,'' ''believe,'' ''project'' or ''continue'' or the negative thereof or other similar words. Such forward-looking statements, based upon the current beliefs and expectations of Yucheng's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: current dependence on the PRC banking industry demand for the products and services of Yucheng; competition from other service providers in the PRC and international consulting firms; the ability to update and expand product and service offerings; retention and hiring of qualified employees; protection of intellectual property; creating and maintaining quality product offerings; operating a business in the PRC with its changing economic and regulatory environment; and the other relevant risks detailed in Yucheng filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Yucheng assumes no obligation to update the information contained in this press release.
For Further Information
Ms. Rebecca Alexander
+1 914 613 3648
+86 10 5913 7998
ralexander@yuchengtech.com
| YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES | |
| Consolidated Balance Sheets | |
December 31 and September 30, 2008 and December 31, 2007 | |
| | | | | | | | | | |
| Assets | | | 2008.12.31 | | | | 2008.9.30 | | | | 2007.12.31 | |
| | | USD | | | USD | | | USD | |
| Current assets: | | | | | | | | | | | | |
| Cash and cash equivalent | | | 35,079,018 | | | | 18,775,350 | | | | 30,459,414 | |
| Trade accounts receivable, net | | | 41,977,921 | | | | 36,963,475 | | | | 27,852,428 | |
| Costs and estimated earnings in excess of billings on uncompleted contracts | | | 9,981,878 | | | | 11,575,171 | | | | 6,374,655 | |
| Amounts due from related companies | | | 229,457 | | | | 1,253,336 | | | | 128,337 | |
| Inventories | | | 141,673 | | | | 4,231,068 | | | | 1,212,413 | |
| Pre-contract costs | | | 1,447,592 | | | | 2,727,804 | | | | 501,098 | |
| Other current assets | | | 6,424,447 | | | | 7,128,390 | | | | 11,820,122 | |
| Deferred income taxes assets - Current | | | 28,717 | | | | 778,407 | | | | - | |
| | | | | | | | | | | | | |
| Total current assets | | | 95,310,703 | | | | 83,433,001 | | | | 78,348,467 | |
| | | | | | | | | | | | | |
| Investments in and advances to affiliates | | | 329,240 | | | | 739,484 | | | | 308,738 | |
| Fixed assets | | | 11,320,664 | | | | 11,081,954 | | | | 6,067,353 | |
| Less: Accumulated depreciation | | | (2,907,970 | ) | | | (2,558,758 | ) | | | (1,505,239 | ) |
| Fixed assets, net | | | 8,412,694 | | | | 8,523,196 | | | | 4,562,114 | |
| Intangible assets, net | | | 5,271,411 | | | | 5,591,979 | | | | 5,641,331 | |
| Goodwill | | | 27,592,840 | | | | 25,105,254 | | | | 23,185,596 | |
| Deferred income taxes - Non-current | | | 1,871,133 | | | | 806,138 | | | | 354,052 | |
| Other non-current assets | | | - | | | | 284,123 | | | | 96,930 | |
| | | | | | | | | | | | | |
| Total assets | | | 138,788,021 | | | | 124,483,175 | | | | 112,497,228 | |
| YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES | |
| Consolidated Balance Sheets (continued) | |
| December 31 and September 30, 2008 and December 31, 2007 | |
| | | | | | | | | | |
| Liabilities and stockholders' equity | | | 2008.12.31 | | | | 2008.9.30 | | | | 2007.12.31 | |
| | | USD | | | USD | | | USD | |
| Current liabilities: | | | | | | | | | | | | |
| Short term loan | | | 8,778,861 | | | | 8,799,847 | | | | 4,791,501 | |
| Obligations under capital leases | | | 419,594 | | | | 412,567 | | | | 198,620 | |
| Trade accounts payables | | | 20,989,563 | | | | 14,637,413 | | | | 12,835,711 | |
| Billings in excess of costs and estimated earnings on uncompleted contracts | | | 2,109,956 | | | | 590,577 | | | | 948,521 | |
| Employee and payroll accruals | | | 1,826,585 | | | | 1,769,377 | | | | 1,189,201 | |
| Dividends payable to ex-owners | | | 807,861 | | | | 809,792 | | | | 3,596,830 | |
Deemed distribution to ex-owners1 | | | 6,853,156 | | | | 3,522,890 | | | | 5,587,458 | |
Outstanding payment in relation to business acquisitions1 | | | 3,390,497 | | | | 2,210,431 | | | | 7,577,819 | |
| Income taxes payable | | | 1,463,046 | | | | 1,428,325 | | | | 1,501,643 | |
| Other current liabilities | | | 7,861,246 | | | | 6,012,959 | | | | 4,995,741 | |
| Deferred income taxes - Current | | | 143,468 | | | | 257,038 | | | | - | |
| | | | | | | | | | | | | |
| Total current liabilities | | | 54,643,833 | | | | 40,451,216 | | | | 43,223,045 | |
| | | | | | | | | | | | | |
| Obligations under capital leases | | | 379,983 | | | | 489,880 | | | | 329,993 | |
| Deferred income taxes | | | 494,423 | | | | 540,525 | | | | 727,260 | |
| | | | | | | | | | | | | |
| Total liabilities | | | 55,518,239 | | | | 41,481,621 | | | | 44,280,298 | |
| | | | | | | | | | | | | |
| Minority interests | | | 1,759,231 | | | | 2,149,007 | | | | 711,786 | |
| | | | | | | | | | | | | |
| Stockholders' equity | | | | | | | | | | | | |
| Preferred stock, $0.0001 par value, authorized 2,000,000 shares and none issued; Common stock, $0.0001 par value, authorized 60,000,000 shares; 16,610,853, 17,575,685 shares issued and outstanding as of December 31, 2007; September 30, 2008 and December 31, 2008 | | | 2,927,358 | | | | 2,934,355 | | | | 2,738,906 | |
| Additional paid-in capital | | | 50,239,872 | | | | 54,405,612 | | | | 49,506,395 | |
| Reserves | | | 5,561,239 | | | | 3,647,365 | | | | 3,404,544 | |
| Retained earnings | | | 23,184,775 | | | | 20,411,229 | | | | 12,069,390 | |
| Accumulated other comprehensive loss | | | (402,693 | ) | | | (546,014 | ) | | | (214,091 | ) |
| | | | | | | | | | | | | |
| Total Stockholders' equity | | | 81,510,551 | | | | 80,852,547 | | | | 67,505,144 | |
| | | | | | | | | | | | | |
| Liabilities and Stockholders' equity | | | 138,788,021 | | | | 124,483,175 | | | | 112,497,228 | |
1 In the fourth quarter, Yucheng successfully achieved its net income target and has allocated 0.95M shares to the selling shareholders of our 2006 merger companies. These accruals can be seen in the balance sheet under “Payment of purchase of subsidiaries” and “Dividends paid to ex-owners.” The accounts will return to their former level when the shares are issued pending the final audit, as stipulated in our 20F.
| YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES | |
| Consolidated Statements of Income | |
| Three months ended December 31, 2008 and 2007 | |
| | | | | | | |
| | | | 2008 Q4 | | | | 2007 Q4 | |
| | | USD | | | USD | |
| Revenues: | | | | | | | | |
| IT Solutions and Services | | | 20,265,066 | | | | 13,639,780 | |
| System Integration | | | 13,938,646 | | | | 9,846,215 | |
| | | | | | | | | |
| Total revenues | | | 34,203,712 | | | | 23,485,995 | |
| | | | | | | | | |
| Cost of revenues: | | | (21,878,757 | ) | | | (14,694,272 | ) |
| | | | | | | | | |
| Gross profit | | | 12,324,955 | | | | 8,791,723 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Research and Development | | | (90,729 | ) | | | (98,895 | ) |
| Selling and marketing | | | (2,339,304 | ) | | | (1,731,422 | ) |
| General and administrative | | | (4,909,353 | ) | | | (2,764,432 | ) |
| | | | | | | | | |
Total operating expenses2 | | | (7,339,386 | ) | | | (4,594,749 | ) |
| | | | | | | | | |
| Income from Operating | | | 4,985,569 | | | | 4,196,974 | |
| | | | | | | | | |
| Other income (expenses): | | | | | | | | |
| Interest income | | | 36,084 | | | | 75,919 | |
| Interest expense | | | (161,471 | ) | | | (117,920 | ) |
| Investment gain (loss) | | | (492,821 | ) | | | 597,465 | |
| Other income (expense), net | | | 74,277 | | | | (3,974 | ) |
| | | | | | | | | |
| Income before income tax and minority interests | | | 4,441,638 | | | | 4,748,464 | |
| | | | | | | | | |
| Income tax benefit (expense) | | | 245,546 | | | | (717,336 | ) |
| Minority interests | | | 57,614 | | | | (165,802 | ) |
| | | | | | | | | |
| Net income (GAAP) | | | 4,744,798 | | | | 3,865,326 | |
| | | | | | | | | |
| Amortization for intangible assets | | | 335,522 | | | | 313,933 | |
| | | | | | | | | |
| Net income (non-GAAP) | | | 5,080,320 | | | | 4,179,259 | |
| YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES | |
| Consolidated Statements of Cash Flows | |
| Three months ended December 31, 2008 | |
| | | | |
| | | | 2008 Q4 | |
| | | USD | |
| | | | | |
| Cash flows from operating activities: | | | | |
| Net income | | | 4,744,798 | |
| adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | |
| | | | | |
| Depreciation | | | 1,018,819 | |
| Amortization | | | 682,794 | |
| Loss on disposal fixed assets | | | (12,029 | ) |
| Loss (gain) on disposal of affiliates | | | 9,639 | |
| Minority interests | | | (57,614 | ) |
| Share of equity in affiliate company | | | 408,481 | |
| Loss from trust investment | | | 77,406 | |
| Shares issued to independent directors | | | 142,376 | |
| Decrease (increase) in trade accounts receivable, net | | | (5,157,275 | ) |
| Decrease (increase) in costs and estimated earnings in excess of billing on uncompleted contracts | | | 1,565,688 | |
| Decrease (increase) in due from related parties | | | 1,020,890 | |
| Decrease (increase) in inventories | | | 4,079,305 | |
| Decrease (increase) in precontract costs | | | 1,166,183 | |
| Decrease (increase) in other current assets | | | 913,852 | |
| Decrease (increase) in deferred income taxes assets - Current | | | 747,833 | |
| Decrease (increase) in deferred income taxes assets - Non-current | | | (1,066,918 | ) |
| Increase (decrease) in trade accounts payable | | | 6,387,059 | |
| Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts | | | 1,521,775 | |
| Increase (decrease) in employee and payroll accruals | | | 102,273 | |
| Increase (decrease) in income taxes payable | | | 54,042 | |
| Increase (decrease) in other current liabilities | | | 2,570,659 | |
| Increase (decrease) in deferred income taxes liabilities | | | (130,888 | ) |
| Payments of capital leases | | | 464,704 | |
| | | | | |
| Net cash provided by (used in) operating activities | | | 21,253,852 | |
| YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES | |
| Consolidated Statements of Cash Flows (continued) | |
| Three months ended December 31, 2008 | |
| | | | |
| | | | 2008 Q4 | |
| | | USD | |
| | | | | |
| Cash flows from investing activities: | | | | |
| Capital expenditures | | | (1,654,279 | ) |
| Loss from trust investment | | | (77,406 | ) |
| Payment of purchase of subsidiaries | | | (1,386,033 | ) |
| Proceeds from disposal of fixed assets | | | 13,696 | |
| Payments from disposal of a subsidiary | | | (296,344 | ) |
| | | | | |
| Net cash provided by (used in) investing activities | | | (3,400,366 | ) |
| | | | | |
| Cash flows from financing activities: | | | | |
| Payment of capital leases | | | (305,040 | ) |
| Proceeds from bank borrowings | | | 2,926,287 | |
| Repayments of bank borrowings | | | (2,926,287 | ) |
| Dividends paid to ex-owners | | | (1,200,000 | ) |
| | | | | |
| Net cash provided by financing activities | | | (1,505,040 | ) |
| | | | | |
| Net increase in cash and cash equivalents | | | 16,348,446 | |
| | | | | |
| Cash at beginning of period | | | 18,730,572 | |
| Cash at end of period | | | 35,079,018 | |
