- Company reports 2006 revenue of $26.4 million and net income of $1.4
million
- On January 31, 2007 Company completed acquisition of Oceanic Well
Profit, Inc.
LOS ANGELES, April 2 /Xinhua-PRNewswire-FirstCall/ -- Home System Group
(OTC Bulletin Board: HSYT) based in Guangdong Province, PRC, an International
manufacturer and distributor of home appliance products to major global
retailers, today announced 2006 financial results.
Reported results exclude contribution from the January 2007 acquisition of
Holy (H.K.) Limited, a Hong Kong holding company which owns 100 percent of
Oceanic Well Profit, Inc., one of China's largest professional BBQ gas grill
manufacturers with annual production capacity of $75 million.
For the year ended December 31, 2006, revenues were $26.4 million and were
generated from the distribution of home appliance products, including BBQ gas
grills, home water pumps, blenders, electric fans, heaters, and other
electronic and environmentally friendly products made in China and sold
through major distributors such as Nexgrill, Pro Steel, Rich Empire and Whalen
directly to retailers based in the US, Europe and Australia. Cost of sales for
the year were $23.7 million yielding gross profits of $2.7 million and gross
margins of 10.1 percent. General and administrative expenses were $1 million,
of which $0.7 million was a non-cash charge related to equity compensation for
consultants.
Operating income for the year totaled $1.7 million with a related
operating margin of 6.4 percent. Net income was $1.4 million with earnings per
share of $0.08 based on 16.1 million fully diluted shares outstanding. The
Company did not incur taxes as revenues were generated outside of Hong Kong.
Net cash provided by operating activities for 2006 totaled $2.0 million,
which was a result of positive net income, decreased accounts receivable and
strong working capital management. Current assets were $7.2 million and the
Company maintained a healthy current ratio of 2.1 to 1. Shareholders' equity
improved 133.8 percent to $3.8 million.
"We made further progress in growing our International business by
establishing incremental distribution capabilities in Europe and North
America, adding new product lines to broaden our portfolio, while formalizing
several new customer relationships. In order to develop a vertically
integrated Company and capitalize on the management teams' manufacturing
expertise, we have been actively pursuing acquisition opportunities, including
companies developing and manufacturing key products complementary to our
distribution platform," stated Mr. Li Wei Qiu, CEO and Chairman of Home System
Group.
"On January 30 2007, the Company completed a crucial first step in this
initiative with the acquisition of Oceanic Well Profit, Inc., which is located
in Zhongshan City, Guangdong Province, adjacent to Shenzhen. The Company is a
leading OEM manufacturer of BBQ gas grills for end customers such as Home
Depot which sells the product under its Charm Glow(R) private label. In 2006
Home System generated 15 percent of its revenues from distributing Oceanic
Well Profit's product and thus we anticipate this acquisition will
significantly enhance overall margins and provide incremental opportunities
for pricing power. As a point of reference, over $4 billion in grill sales
occur in the United States each year, with approximately 85 percent of
households owning a grill."
Consideration for the purchase of Oceanic Well Profit included 42.5
million common shares and $3 million in cash. After the acquisition of Oceanic
Well Profit, the Company had approximately 62.5 million shares outstanding.
The Company commenced operations in April, 2006 and utilizes a state of the
art, newly constructed 864,000 square-foot manufacturing facility on 82.5
acres of property. This new facility is equipped with over 500 pieces of
advanced production equipment and utilizes a staff of 1,200 employees.
Currently, the facility operates five production lines which are
interchangeable and can produce 450,000 grills, 3 million water pumps, and 2
million tool and hardware cabinets annually, collectively representing $75
million in total revenue capacity.
Additionally, Oceanic Well Profit, Inc. has an extensive research and
development team consisting of 278 employees dedicated to product enhancement
and development, As part of the Company's new product efforts, Oceanic Well
Profit expects to introduce a new line of energy efficient oven range hoods,
BBQ grills, water pumps and dishwashers, in addition to new tool and hardware
cabinets. Management expects that these new product introductions will
complement and enhance its current product offering while further penetrating
both international and domestic markets through existing and new customers.
"We have identified several additional acquisition opportunities which are
attractive from a production and geographic standpoint. The goal is to
increase the size and scope of our Company while capitalizing on our ability
to significantly increase overall production capacity and monetizing a broader
base of significant customers. The new facility we purchased with Ocean Well
Profit offers us the flexibility to meaningfully improve our economies of
scale and optimize leverage in our business model. The secular trend towards
outsourcing manufacturing to China remains strong and we are well positioned
to capture a meaningful portion of this large and growing market," Mr. Li Wei
Qiu concluded.
About Home System Group
Headquartered in Hong Kong, China, Home System Group, through its wholly
owned distributor Oceanic International (Hong Kong), Ltd. (OCIL) and Oceanic
Well Profit produces and distributes home appliances, including stainless
steel gas grills, residential water pumps, electronic fans, fruit processors,
and other electrical appliances to retailers in the U.S., Europe and Australia.
The Company became public through a reverse merger and received its stock
trading symbol on October 4, 2006. Please visit the company website at:
www.homesystemgroup.com.
Safe Harbor Statement:
Certain statements in this news release may contain forward-looking
information about Home System Group, Inc.'s business and products within the
meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the
Securities Exchange Act of 1934, and are subject to the safe harbor created by
those rules. The actual results may differ materially depending on a number of
risk factors including, but not limited to, the following: general economic
and business conditions, product development, shipments to end customers,
market acceptance of new and existing products, additional competition from
existing and new competitors, changes in technology, and various other factors
beyond its control. All forward-looking statements are expressly qualified in
their entirety by this Cautionary Statement and the risks factors detailed in
the Company's reports filed with the Securities and Exchange Commission. Home
System Group undertakes no duty to revise or update any forward-looking
statements to reflect events or circumstances after the date of this release.
The financial information stated above and in the tables below has been
abstracted from the Company's Form 10-K for the year ended December 31, 2006
filed with the Securities and Exchange Commission and should be read in
conjunction with the information provided therein.
HOME SYSTEM GROUP (formerly SUPREME REALTY INVESTMENTS, INC.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
2006 2005
ASSETS
CURRENT ASSETS
Cash $65,615 $103,701
Accounts receivable - Net of
allowance for doubtful
accounts of $58,012 and $-0- 1,886,349 3,962,986
Trade deposits 2,903,959 2,208,079
Due from directors 7,629 -
Due from related party 2,344,415 -
7,207,967 6,274,766
PROPERTY AND EQUIPMENT 996 -
TOTAL ASSETS $7,208,963 $6,274,766
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans $962,020 $3,030,836
Accounts payable and accrued expenses 2,474,180 1,578,677
Due to directors 8,624 54,917
TOTAL LIABILITIES 3,444,824 4,664,430
STOCKHOLDERS' EQUITY
COMMON STOCK - $0.001 par value;
200,000,000 shares authorized,
19,797,949 and 8,000,000 shares issued
and outstanding 19,798 8,000
ADDITIONAL PAID-IN CAPITAL 1,680,204 (7,998)
NOTE RECEIVABLE FOR STOCK ISSUANCE (900,000) -
RETAINED EARNINGS 2,964,137 1,610,334
TOTAL STOCKHOLDERS' EQUITY 3,764,139 1,610,336
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $7,208,963 $6,274,766
HOME SYSTEM GROUP (formerly SUPREME REALTY INVESTMENTS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006
2006
NET SALES $26,391,044
OPERATING EXPENSES
Cost of net sales 23,736,261
General and administrative expenses 992,379
24,728,640
INCOME FROM OPERATIONS 1,662,404
OTHER INCOME (EXPENSE)
Finance costs (313,784)
Interest income 5,183
(308,601)
NET INCOME $1,353,803
BASIC AND DILUTED EARNINGS PER SHARE $0.08
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 16,047,950
