omniture

China Digital Communication Group Reports Second Quarter 2009 Financial Results

2009-08-06 04:00 2353

Strong Growth Continues, Q2 Revenue Increases 358% to $5.4 Million, Q2 Net Income of $1.3 Million Compared to Net Loss in Q2 2008

NEW YORK, and SHENZHEN, China, Aug. 6 /PRNewswire-Asia/ -- China Digital Communication Group (OTC Bulletin Board: CMTP), a manufacturer and distributor of battery components in China, announced today its financial results for the three months ended June 30, 2009.

Second Quarter Highlights

-- Revenue was $5.4 million, an increase of 358% from $1.2 million in 2008

-- Gross profit was $1.6 million, compared to approximately $90,000

in 2008

-- Net income was $1.3 million, compared to $(587) in 2008

-- Fully diluted earnings per share increased to $0.22 from $(0.00)

in 2008

Second Quarter 2009 Results

"China Digital's new battery assembly and distribution business continues to add significant growth to both our top and bottom line," said Mr. Fushun Li, China Digital's newly appointed Chief Executive Officer. "Not only have we been increasing sales across all segments, we have also enacted cost cutting measures to further improve our margins and thus the overall health of the Company."

China Digital's net revenue in the second quarter of 2009 was $5.4 million, an increase of 358% from $1.2 million in the second quarter of 2008. Net revenue increased primary due to the Company's entrance into its new business segment -- assembly and distribution of batteries since the third quarter of 2008. A contributing factor was an increase of sales in the Company's battery shell and cover business.

Sales for the new battery distribution segment were $3.7 million, or 68% of the Company's net revenue in the second quarter of 2009. Sales of the Company's battery shell and cover business segment were $1.7 million in the second quarter of 2009, representing a 45% increase from sales of $1.2 million in the second quarter of 2008. This increase is primarily attributed to the rise in sales to our existing customers.

Gross profit in the second quarter of 2009 was $1.6 million, compared with gross profit of approximately $90,000 in the second quarter of 2008. Gross profit margin was 30% in the second quarter of 2009. The improvement in gross profit margin was primarily due to the Company's new battery assembly and distribution segment. Compared to the existing battery shell and cover business, the battery assembly and distribution segment generates higher profit due to the relatively lower cost of sales. The Company has developed effective purchasing techniques that enable its batteries to be successfully marketed, in addition to limiting the number of suppliers and negotiating preferable arrangements when it does business with them.

Operating expenses in the second quarter of 2009 were approximately $99,000, compared to approximately $111,000 in the second quarter of 2008. This decrease was primarily due to cost cutting measures and increased efficiencies.

Income from operations in the second quarter of 2009 was $1.5 million, compared with approximately $(21,000) in the second quarter of 2008. Operating margin was 28% in the second quarter of 2009.

Income taxes were approximately $151,000 compared to $0 in the second quarter of 2008. The Company's effective tax rate was 10% compared to 0%, due to the fact that there was no income in the second quarter of 2008.

Net income was $1.3 million in the second quarter of 2009, compared to a net loss of $(587) in the second quarter of 2008. Fully diluted earnings per share were $0.22 for the second quarter of 2009, compared to $(0.00) in the second quarter of 2008.

Financial Condition

As of June 30, 2009, China Digital had cash and cash equivalents of $10.0 million and working capital of $10.9 million. Loan payables totaled $2.3 million and shareholders' equity was $12.5 million. During the six months ended June 30, 2009, net cash provided by operating activities was $3.1 million and was primarily due to an increase in sales and quick payment collection on accounts receivable.

Recent Developments

On July 13, 2009, the Company underwent a 10-to-1 reverse stock split. The principal effect of the Reverse Split was that the number of shares of Common Stock issued and outstanding was reduced from 54,460,626 shares to approximately 5,446,062 shares (depending on the number of fractional shares that are issued or cancelled).

On August 4, 2009, China Digital announced the appointment of Junfeng Chen as Interim CFO, replacing Jiangcheng Wu, while the Company undergoes an extensive search for a highly-qualified candidate to align the company with its growth initiatives going forward.

For the past 3 years, Mr. Chen has been the Chief Financial Officer of the Company's wholly-owned subsidiary Shenzhen E'Jenie Science and Technology Co., Ltd. ("Shenzhen E'Jenie"). From March 2005 to January 2006, Mr. Chen served as the assistant of financial manager in Shenzhen E'Jenie. Junfeng Chen majored in Accounting and graduated from Wuhan University in China.

Business Outlook

"China Digital remains optimistic about its growth potential due to the ever-increasing demand for batteries in both China and abroad," said Mr. Li. "Our most recent quarterly results are exceptional when compared to 2008. By consistently increasing sales and cutting unnecessary costs, China Digital is well on our way to achieving previously issued guidance numbers for 2009."

About China Digital Communication Group

China Digital Communication Group, through its wholly owned subsidiary, Shenzhen E'Jenie Science and Technology Co., Ltd. (E'Jenie), is a manufacturer and developer of advanced telecommunications equipment in China. E'Jenie sells high-quality lithium-ion battery shell and cap products to major lithium-ion battery cell manufacturers in China. E'Jenie's products are used to power mobile phones, MP3 players, laptops, digital cameras, PDAs, camera recorders and other consumer electronic digital devices. China Digital Communication Group is continuing its expansion across East Asia, while seeking distribution partners and acquisitions in new global markets, including the U.S.

For more information, please visit: http://www.chinadigitalcommunication.com

Forward-looking statement

Except for the historical information, the matters discussed in this news release may contain forward-looking statements, including, but not limited to, factors relating to future sales. These forward-looking statements may involve a number of risks and uncertainties. Actual results may differ materially based on a number of factors, including, but not limited to, uncertainties in product demand, risks related to doing business in China, the impact of competitive products and pricing, changing economic conditions around the world, release and sales of new products and other risk factors detailed in the company's most recent annual report and other filings with the Securities and Exchange Commission.

For further information, please contact:

China Digital Communication Group

Ken Lin

Tel: +1-917-573-0302

Email: ken@chinadigitalcommunication.com

China America Financial Communications Group

Darren Minton

Tel: +1-212-823-0523

Email: chinadigital@cafcg.com

China Digital Communication Group and Subsidiaries

Selected Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)

Three months ended June 30,

2009 2008

Revenue $5.4 $1.2

Cost of revenue 3.8 1.1

Selling, general and admin expenses 0.1 0.1

Income from operations 1.5 (0.0)

Interest expense and other (0.0) 0.0

Provision for income taxes 0.2 --

Net income (loss) $1.3 $(0.0)

Basic earnings per share 0.25 (0.00)

Fully diluted earnings per share $0.22 $(0.00)

Basic weighted average shares 5.4 5.4

Diluted weighted average shares 6.2 6.2

NOTE: The above numbers may not total correctly due to rounding.

China Digital Communication Group and Subsidiaries

Selected Consolidated Balance Sheet Items

(in millions)

(unaudited)June 30, December 31,

2009 2008

Cash and cash equivalents $10.0 $7.0

Accounts receivable, net 5.1 7.4

Inventories 0.2 0.8

Property, plant & equipment, net 0.7 0.9

Intangible assets, net 0.8 0.9

Total current liabilities 4.3 6.2

Total stockholders' equity $12.5 $10.6

NOTE: The above numbers may not total correctly due to rounding.

China Digital Communication Group and Subsidiaries

Selected Consolidated Cash Flow Items

(in millions)

(unaudited)

Six months ended June 30,

2009 2008

Net cash provided (used) by

operating activities $3.1 $0.3

Net cash provided (used) by

financing activities (0.0) (0.3)

Effective exchange rate changes (0.0) 0.1

Net change in cash and cash

equivalents $3.0 $0.1

NOTE: The above numbers may not total correctly due to rounding.

China Digital Communication Group And Subsidiaries

Selected Segment Information

(in millions)

Unaudited

Three months ended June 30,

2009 2008

Revenues from unaffiliated

customers:

Battery shell and cover $1.7 $1.2

Battery 3.7 --

Consolidated $5.4 $1.2

Income (loss) from operation:

Battery shell and cover $0.3 $0.1

Battery 1.1 --

Corporation (0.0) (0.1)

Consolidated $1.3 $(0.0)

NOTE: The above numbers may not total correctly due to rounding.

Source: China Digital Communication Group
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