Net Income Increased 49.3% Year-over-year to $1.4 Million
SHENZHEN, China, Nov. 21 /Xinhua-PRNewswire-FirstCall/ -- China Display Technologies, Inc. (OTC Bulletin Board: LCNIA) (“China Display”, or “the Company”), a leading manufacturer of optoelectronic products, specializing in small- to mid-sized LED and CCFL backlight units (“BLUs”) for LCD displays in China, today reported record financial results for the third quarter ended September 30, 2007.
Third Quarter 2007 Highlights
-- Revenues increased 96.9% year-over-year to a record $9.2 million
-- Gross profits increased 111.4% to $2.2 million over the third quarter
of 2006
-- Operating income totaled $1.6 million, up 100.0% from last year
-- Net income was up 49.3% year-over-year to $1.4 million
Third Quarter 2007 Results
“During the quarter we continued to see increased demand for our products from small screen LCD manufacturers due to strong conditions in our end markets and our efforts to expand our client base,” said Mr. Lawrence Chan, CEO of China Display, “In addition, we have taken advantage of the favorable industry environment to improve our production facilities and to accelerate the pace of developing new products, such as the large sized backlight unit.”
Revenues for the three months ended September 30, 2007 were $9.2 million, up 96.9% as compared to $4.7 million for the same period of 2006. The increase was primarily due to the increased demand for BLU products from small screen LCD manufacturers and the Company’s successful market expansion efforts.
Cost of revenues for the three months ended September 30, 2007 was $7.0 million, accounting for 76.1% of the revenues. Gross profit was up 111.4% to $2.2 million, representing gross margins of 23.9% compared with $1.0 million and 22.2% in the third quarter of 2006, respectively. Gross margins increased slightly as a result of the Company’s improved cost control.
Total operating expenses for the three months ended September 30, 2007 were $0.6 million, up 148.1% from the same period in 2006, which was primarily attributable to increased selling expenses. During the quarter, selling expenses increased to $0.3 million in an effort to expand the Company’s market share and promote new products, such as backlights for motor vehicle installations. Research and development expenses rose due largely to investment in new product development. General and administrative expenses were higher due to increased expenses as a public company.
Income from operations doubled to $1.6 million in the third quarter of 2007, representing operating margins of 17.2%, as compared to $0.8 million and 16.9% in the same period of 2006.
In the third quarter of 2007, the Company recorded a $0.11 million provision for income taxes. Under the present Chinese tax law, the Company was entitled to a 100% tax holiday from its enterprise tax in 2005 and 2006, and a 50% tax holiday for the following three years. As a result, the Company pays its enterprise tax in the current year, while it paid no enterprise tax for the comparable periods of the prior year.
Net income for the third quarter of 2007 was $1.4 million, an increase of 49.3% from $0.9 million for the comparable period of 2006.
The beneficial effect of the conversion price is reflected as a deemed dividend of approximately $2.2 million to the holders of the series A preferred stock in the third quarter of 2007. This deemed dividend is a non-cash transaction.
As a result of the foregoing, net income (loss) available to common stockholders for the third quarter of 2007 was $(793,575), or $(0.07) per basic and diluted share, as compared with $787,119, or $0.07 respectively for the same period of 2006.
Nine Months Results
Revenue for the first nine months of 2007 increased 93.6% over the comparable period in 2006 to $20.5 million. Gross profits rose 96.1% in the same period to $4.8 million, representing gross margins of 23.3%. Operating expenses in the first nine months of 2007 increased 93.8% to $1.3 million as a result of increased marketing efforts as well as additional expenses related to the Company’s reverse acquisition. Operating profits in the first nine months of 2007 rose 97.0% over the comparable period in 2006 to $3.5 million, representing operating margins of 17.1%. Net income for the nine months ended September 30, 2007 was $3.2 million, up 64.5% year over year. After the deduction of a $2.2 million deemed preferred stock dividend, net income available to common stockholders for the first nine months of 2007 was approximately $1.0 million, or $0.09 per basic and diluted share.
Financial Condition
As of September 30, 2007, China Display had $2.5 million in cash, and approximately $7.9 million in working capital. Shareholder’s equity at the end of the third quarter stood at $10.3 million compared to $3.9 million at the end of 2006.
Business Outlook
A backlight unit is one of the most expensive components used in LCD products; accounting for 20% to 30% of the overall costs. According to DisplayBank, a Korea-based research firm, the global LCD display market is expected to reach approximately $94 billion by 2010, with a growth rate of 10% to 15% per year.
Originally, the backlight industry was centered in Japan, Korea and then Taiwan. More recently, a large number of backlight manufacturers, have begun production in mainland China. This geographic shift is primarily attributed to significant labor cost advantages, skilled workforce and modern manufacturing facilities in China.
"We continue to benefit from a rapidly growing market for backlight unit products, resulting from increased consumption of end products and expanded applications for LCDs on all kinds of machines and electronics,” said Mr. Lawrence Chan, CEO of China Display Technologies. "We are going to continue our efforts to achieve more market share and improve our product mix."
About China Display Technologies, Inc.
China Display Technologies, Inc. through its wholly-owned subsidiary Suny Electronics (Shenzhen) Company Limited (“SUNY”) in China, designs, manufactures and markets small- to mid-sized Light Emitting Diode (LED) and Cold Cathode Fluorescent Lamp (CCFL) backlights for various types of Liquid Crystal Displays (LCDs). Its products have applications in electronic consumer products, such as mobile phones, PDAs, GPS systems, portable DVD/VCD players, MP3s and MP4s, medical equipment and household appliances with displays. SUNY was organized in November 2004 and started operations in 2005. It has experienced rapid growth and became a publicly-traded company, listed on the OTC market, through a reverse merger in September 2007. The Company has 600 employees, with manufacturing facilities and management located in Shenzhen, China.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website ( http://www.sec.gov ). All forward-looking statements attributable the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.
-- FINANCIAL TABLES FOLLOW --
China Display Technologies Inc. and Subsidiaries
Consolidated Balance Sheet
September 30, 2007
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalent $ 2,544,844
Restricted cash 795,444
Receivables, net of allowance for
doubtful accounts of $139,166 3,352,116
Inventories, net of provision
$153,138 2,132,605
Advances to suppliers 2,966,863
Prepaid expenses and other
receivables 1,750,203
Total current assets 13,542,076
Property and Equipment, net 2,462,128
Total Assets $ 16,004,204
LIABILITIES & STOCKHOLDERS’ EQUITY:
Current Liabilities:
Payables and accrued liabilities $ 1,528,176
Short term loans 3,550,926
Various taxes payable 240,611
Wages payable 94,770
Corporate taxes payable 261,630
Total current liabilities 5,676,113
Due to related party - Chen Guoxin 55,556
Total Liabilities 5,731,669
Commitments and Contingencies
Stockholders’ Equity:
Series A convertible preferred stock,
$.001 par value; 20,000,000 shares authorized;
3,703,704 shares issued and outstanding;
liquidation preference $4,000,000 3,704
Common stock. $.001 par value;
100,000,000 shares authorized; 11,600,000
shares issued and outstanding 11,600
Additional paid-in capital 5,827,694
Accumulated other comprehensive income 336,715
Statutory reserves 198,550
Retained earnings 3,894,272
Total Stockholders’ Equity 10,272,535
Total Liabilities and Stockholders’ Equity $ 16,004,204
China Display Technologies Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Total Revenues $9,175,767 $4,661,127 $20,487,682 $10,583,088
Cost of Sales 6,985,054 3,625,027 15,705,834 8,145,038
Gross Profit 2,190,713 1,036,100 4,781,848 2,438,050
Operating Expenses:
Selling Expenses 275,439 79,855 415,472 168,188
Research and
development 165,957 84,593 391,833 231,384
Other general and
administrative 171,229 82,453 463,108 255,789
Total Expenses 612,625 246,901 1,270,413 655,361
Income from
Operations 1,578,088 789,199 3,511,435 1,782,689
Other Income
(Expenses):
Other (475) -- 68 --
Interest Incomes 817 -- 817 --
Interest Expenses (81,874) (2,080) (96,292) (1,990)
Total Other Income
(Expenses) (81,532) (2,080) (95,407) (1,990)
Income Before
Income Taxes 1,496,556 787,119 3,416,028 1,780,699
Provision for
(Benefit from)
Income Taxes 112,278 -- 256,238 --
Net Income 1,384,278 787,119 3,159,790 1,780,699
Deemed preferred
stock dividend (2,177,853) -- (2,177,853) --
Net Income (loss)
available to
common
shareholders $ (793,575) $ 787,119 $ 981,937 $ 1,780,699
Net earnings
(loss) per share
of common stock,
basic $ (0.07) $ 0.07 $ 0.09 $ 0.15
Weighted average
number of shares
outstanding,
basic 11,553,348 11,542,000 11,545,824 11,542,000
Net earnings
(loss) per share
of common stock,
diluted $ (0.07) $ 0.07 $ 0.06 $ 0.15
Weighted average
number of shares
outstanding,
diluted 11,553,348 11,542,000 15,249,528 11,542,000
China Display Technologies Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
2007 2006
Cash flows from operating activities
Net income $3,159,790 $1,780,699
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation 322,494 257,783
Change in operating assets and liabilities:-
Decrease (Increase) in assets:
Accounts receivable, net (1,304,822) (1,603,956)
Advances to suppliers (2,966,863) --
Inventories, net (605,438) (776,486)
Prepaid expenses and other
receivables (1,516,988) 129,834
Increase (Decrease) in liabilities:
Accounts payables and accrued
liabilities 249,430 1,638,844
Various tax payable (7,619) --
Wage payable 18,780 (87,771)
Corporate tax payable 256,237 176,126
Due to related parties -- 189,892
Net cash provided by (used in)
operating activities (2,394,999) 1,704,965
Cash flows from investing activities
Increase in restricted cash (779,048) --
Purchase of property and equipment (934,319) (656,575)
Net cash used in investing activities (1,713,367) (656,575)
Cash flows from financing activities
Proceeds from loans payable 3,477,734 --
Net Proceeds from preferred stock
offering 2,979,993 --
Proceeds From related party loan 5,844 --
Repayment of related party loans -- (66,341)
Net cash provided by (used in)
financing activities 6,463,571 (66,341)
Effect of exchange rate changes on
cash 54,648 (301,011)
Net increase in cash 2,409,853 681,038
Cash, beginning of period 134,991 26,135
Cash, end of period $2,544,844 $ 707,173
Supplemental disclosure information:
Interest expense paid $ 96,292 $ 1,990
Income taxes paid $ 256,238 $ --
For more information, please contact:
Company Contact:
Mr. Jason Wong
Executive Vice President
China Display Technologies, Inc.
Tel: +852-9257-8928
Email: jason@suny.hk
Investor Relations Contact:
Mr. Crocker Coulson
President
CCG Elite Investor Relations
Tel: +1-646-213-1915 (NY office)
Email: crocker.coulson@ccgir.com
