SHENZHEN, China, April 1 /PRNewswire-Asia/ -- Diguang International Development Co., Ltd. (OTC Bulletin Board: DGNG) ("Diguang" or the "Company") today announced its financial results for the fourth quarter and 2008 fiscal year, ended December 31, 2008.
(Logo: http://www.prnasia.com/sa/200708301921-min.JPG )
-- Net revenue for fiscal year 2008 increased 21% year over year to
$55.4 million
-- Sales to domestic (China-based) customers increased 106%
year-over-year
-- Growth initiatives underway on new ultra-slim 19" LED computer
monitors, general LED lighting solutions and LED mini-notebook
computers
"Along with every other company in our sector, we were heavily impacted by the global slow-down in consumer demand for such digital display products as automobile TVs, portable DVDs, MP3 and MP4 units and LCD products resulting from the global economic recession in the second half of 2008, especially in the fourth quarter," commented Song Yi, President and Chief Executive Officer of Diguang International. "However, we made excellent progress during the year on our strategy of diversifying our products into higher value-added products such as LCD modules, the ultra-slim 19" LED monitors that we launched commercially in March of 2009, general LED lighting solutions and mini-notebooks."
Full-Year 2008 Results
Revenue for the fiscal year ended December 31, 2008 increased 21% to $55.4 million from $45.9 million in 2007. The increase was primarily attributed to increased orders for CCFL products, especially higher-priced 19" CCFL products delivered to top TFT-LCD panel makers. New mini-computers, LED general lighting products, LCD modules and other products also contributed to this increase.
Sales to international customers totaled $40.4 million for the year ended December 31, 2008, an increase of 5% compared to $38.6 million in international sales during the year ended December 31, 2007. Sales to domestic (China-based) customers increased 106% during fiscal year 2008 to $15.0 million compared to $7.3 million reported in fiscal 2007. The increase in domestic sales primarily resulted from sales of mid-size LED products.
Cost of sales was $50.7 million for the year ended December 31, 2008, an increase of $12.6 million, or 33%, compared to $38.1 million for the year ended December 31, 2007. Included in this increase was a 30% rise in raw material costs in 2008, compared to 2007. Raw material costs accounted for 71% of total revenue versus 67% in 2007. Labor costs increased year over year by 38%, to $6.5 million, and accounted for 12% of 2008 total net revenue, compared to 10% in 2007. Cost of sales included production overhead amounting to $3.4 million, a 26% increase over 2007 overhead of $2.7 million. Also included in fiscal 2008 cost of sales was a one-time fourth-quarter inventory write-down totaling $1.2 million, compared to a fiscal 2007 fourth-quarter inventory write-down of $296,000.
Gross margin for the year ended December 31, 2008 was 9%, compared to 17% for the year ended December 31, 2007. The decline in gross margin is primarily attributed to industry-wide pricing pressure on legacy products, an inability to transfer pricing pressure to suppliers and the inventory write-down noted above.
Total operating expenses for fiscal year 2008 were $8.5 million, or 15.4% of sales, compared to $10.1 million, or 22% of sales, for fiscal year 2007. As components of total operating expenses, selling expenses decreased by 28% year over year to $1.9 million, research and development expenses increased by 10% to $1.2 million in support of new product development, and general and administrative expenses decreased by 15% to $5.5 million primarily due to reduction in headcount, decrease in bad debt allowance and start-up expenses related to the Wuhan facilities incurred in 2007, which did not recur in 2008.
Bad debt allowance was $350,000 for the year ended December 31, 2008, a 47% decrease compared to $658,000 for the year ended December 31, 2007. In addition, there was a non-cash impairment related to a long term investment amounting to $157,000 for the year ended December 31, 2008, down from $622,000 for the year ended December 31.
Net loss was $4.7 million for the year ended December 31, 2008, compared to a $2.9 million net loss for 2007. Net loss per diluted weighted average share totaled $(0.21) for the year ended December 31, 2008, compared to $(0.13) for the year ended December 31, 2007. The increase in loss per share for 2008 was primarily due to a significant decrease in gross margin, increased net interest expenses and a decrease in investment income year over year, offset by the decrease in selling , general and administrative expenses for the year. In addition, weighted average common shares outstanding decreased to 22,156,000 shares for 2008, compared with 22,531,000 shares for 2007.
Excluding non-cash items, the net loss for fiscal year 2008 on a non-GAAP basis would have been $2.3 million, or ($0.11) per share. Excluding non-cash items, net income for fiscal year 2007 on a non-GAAP basis would have been $417,000, or $0.02 per share. Please see the reconciliation table below.
Highlights for the three months Ended December 31, 2008
Net revenue totaled $8.7 million for the three months ended December 31, 2008, a decrease of $5.8 million, or 39.9%, compared to $14.5 million for the three months ended December 31, 2007.
Cost of sales was $9.7 million for the three months ended December 31, 2008, a decrease of $2.7 million, or 21.8%, compared to $12.4 million for the same period in 2007.
Gross profit for the three months ended December 31, 2008 was negative, compared to gross profit of $2.1 million, or 14.7% of net sales, for the same period of 2007. Negative impacts on the Company’s fourth-quarter gross margin included a global recessionary slump in consumer demand for many products, a $1.2 million inventory write-down, compared to a fiscal 2007 fourth-quarter inventory write-down of $296,000, and incurrence of overhead costs despite lower sales.
Operating expenses totaled $2.7 million for the 2008 fourth quarter, a year-over-year decrease of 14.9%. As a percentage of net sales, fourth-quarter 2008 total operating expenses amounted to 30.4%, compared to fourth-quarter 2007 operating expenses at 21.5% of net sales. Quarterly selling expenses declined by 46.8% year over year, to approximately $511,000. Fourth-quarter research and development expenses increased by approximately 2 times to $328,000. Quarterly general and administrative expenses declined 11.3% year over year to $1.8 million.
The Company’s net loss during the three months ended December 31, 2008 was $3.7 million, compared to an approximate $2.0 million net loss for the three months ended December 31, 2007.
The loss per basic and diluted share was ($0.17) for the three months ended December 31, 2008, compared to a ($0.09) loss per share for the three months ended December 31, 2007.
Excluding non-cash items, the net loss for the fourth quarter of year 2008 on a non-GAAP basis would have been $2.1 million, or ($0.09) per share. Excluding non-cash expenses, the net loss for the fourth quarter of year 2007 on a non-GAAP basis would have been $119,000, or ($0.01) per share. Please see the reconciliation table below.
As of December 31, 2008, Diguang had cash and cash equivalents of $15.0 million and working capital of $7.9 million. Shareholders’ equity totaled approximately $24.8 million.
Reconciliation of GAAP Net Income and Earnings per Share to Non-GAAP Net
Income and Earnings per Share
Three Months Ended Year Ended
December 31 December 31
2007 2008 2007 2008
GAAP net income/(loss) (1,984,000)(3,720,000)(2,905,000) (4,718,000)
Inventory write-down 296,000 1,184,000 296,000 1,240,000
Stock-based compensation 411,000 144,000 1,206,000 572,000
Minority Interest 117,000 (74,000) 335,000 196,000
Bad debt allowance 604,000 221,000 604,000 221,000
Impairment loss 622,000 157,000 622,000 157,000
New manufacturing
start-up expenses -- -- 260,000 --
Non-GAAP net
income/(loss) (119,000)(2,088,000) 417,000 (2,332,000)
GAAP net income/(loss)
per share (0.09) (0.17) (0.13) (0.21)
Inventory write-down 0.01 0.05 0.01 0.06
Stock-based compensation 0.02 0.01 0.05 0.03
Minority Interest 0.01 0.00 0.01 0.01
Bad debt allowance 0.03 0.01 0.03 0.01
Impairment loss 0.03 0.01 0.03 0.01
New manufacturing
start-up expenses 0.00 0.00 0.01 0.00
Non-GAAP earnings/(loss)
per share - basic and
diluted (0.01) (0.09) 0.02 (0.11)
Weighted average shares
outstanding - basic and
diluted 22,331,384 22,200,822 22,531,384 22,155,882
Use of Non-GAAP Financial Measures
Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R, which requires the Company to begin recognizing compensation expense relating to stock-based payment transactions. To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company provides non-GAAP financial information. The Company’s management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company’s historical performance. The additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
Most Recent Events
In March, 2009, Diguang announced the commercial launch of its new ultra-slim 19" LED computer monitors in several major cities spanning all the most heavily populated regions of China. Management believes that these products answer unmet consumer demand and Chinese government mandates for affordable low-radiation, energy-saving computer monitors that the Company can market at relatively high margins.
Teleconference and Webcast Information
Management will conduct a conference call and webcast to discuss financial results for the full year and fourth quarter, ended December 31, of its 2008 fiscal year. The conference call and webcast will take place at 10:00 a.m. Eastern (U.S.) time today, Wednesday, April 1, 2009. Anyone interested in participating should call +1-866-730-5766 if calling from within the United States, or +1-857-350-1590 if calling internationally; the pass code is 76433907.
There will be a replay available until April 8, 2009. To listen to the playback, please call +1-888-286-8010 if calling within the United States, or +1-617-801-6888 if calling internationally. Please use pass code 36502466 for the replay.
The event will also be webcast live through a link on the Company’s web site at http://www.diguangintl.com , and a webcast archive will be available for 90 days. The webcast is also being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at http://www.earnings.com , Thomson’s individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (http://www.streetevents.com ), a password-protected event management site.
About Diguang International Development Co., Ltd.
Through its subsidiaries, Diguang develops energy-saving technologies and solutions for rapidly growing LED-related markets such as LED lighting, LED backlight monitors and LED netbooks, and produces other LED backlights for a wide range of TFT-LCD products. A backlight is the typical light source of a liquid crystal display (LCD), with applications spanning televisions, computer monitors, cellular phones, digital cameras, DVDs and other home appliances. Diguang is a Nevada corporation with its manufacturing subsidiaries located in China, and a sales and marketing subsidiary located in Hong Kong.
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Diguang’s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks, including but not limited to risks outlined in the Company’s periodic filings with the U.S. Securities and Exchange Commission. Diguang does not assume any obligation to update the information contained in this press release.
(financial tables follow)
DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars)
December 31,
2007 2008
ASSETS
Current assets:
Cash and cash equivalents $16,250,727 $15,024,363
Accounts receivable, net of allowance
for doubtful account $680,784 and
$655,893 12,713,705 9,944,208
Inventories, net of provision
$841,518 and $2,081,334 7,499,768 7,285,860
Other receivables, net of provision
$102,574 and $ 101,020 389,764 535,493
VAT recoverable 407,376 112,842
Advance to suppliers 904,203 602,017
Deferred tax asset 86,572 28,485
Total current assets 38,252,115 33,533,268
Investment, net of impairment $622,194
and $779,302 877,806 720,698
Property and equipment, net 17,449,871 19,369,200
Total assets $56,579,792 $53,623,166
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank loans $-- $4,397,215
Accounts payable 18,855,416 15,643,476
Advance from customers 464,281 561,282
Accruals and other payables 3,358,199 2,337,800
Accrued payroll and related expense 795,690 626,277
Income tax payable 428,217 401,260
Amount due to related parties 1,465,790 674,548
Amount due to stockholders - current 1,100,000 1,005,480
Total current liabilities 26,467,593 25,647,338
Research funding advanced 245,730 644,925
Amount due to stockholders 1,100,000 --
Total non-current liabilities 1,345,730 644,925
Total liabilities 27,813,323 26,292,263
Minority interest 1,475,361 2,520,704
Stockholders’ equity:
Common stock, par value $0.001 per
share, 50 million shares authorized,
22,593,000 and 22,593,000 shares
issued, 22,340,700 and 22,072,000
shares outstanding 22,593 22,593
Additional paid-in capital 20,028,955 20,600,460
Treasury stock at cost (429,295) (674,455)
Appropriated earnings 1,949,839 2,114,448
Retained earnings 3,127,110 (1,755,869)
Translation adjustment 2,591,906 4,503,022
Total stockholders’ equity 27,291,108 24,810,199
Total liabilities and stockholders’
equity $56,579,792 $53,623,166
DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. Dollars)
Years Ended December 31,
2006 2007 2008
Revenues:
Revenues, net $34,242,617 $45,909,256 $55,430,680
Cost of sales 23,145,450 38,087,919 50,690,610
Gross profit 11,097,167 7,821,337 4,740,070
Selling expense 1,574,524 2,582,456 1,854,369
Research and development 786,322 1,054,367 1,163,830
General and administrative 6,656,469 6,476,242 5,509,517
Loss on disposal of assets -- -- 3,726
Impairment loss -- 622,194 157,108
Income (loss) from operations 2,079,852 (2,913,922) (3,948,480)
Interest income (expense), net 158,699 122,251 (259,666)
Investment income (loss) 53,676 483,311 67,523
Other income (loss) (99,908) (168,017 (190,513)
Income (loss) before
income taxes 2,192,319 (2,476,377) (4,331,136)
Income tax provision 452,562 94,343 191,309
Net income (loss) before
minority interest 1,739,757 (2,570,720) (4,522,445)
Minority interest 74,941 334,617 195,925
Net income (loss) $1,664,816 $(2,905,337) $(4,718,370)
Weighted average common
shares outstanding - basic 21,383,960 22,531,384 22,155,882
Earnings (loss) per share -
basic 0.08 (0.13) (0.21)
Weighted average common shares
outstanding - diluted 21,383,960 22,531,384 22,155,882
Earning (loss) per shares -
diluted 0.08 (0.13) (0.21)
Other comprehensive income:
Net income $1,664,816 $(2,905,337) $(4,718,370)
Translation adjustments 851,488 1,857,709 1,911,116
Comprehensive income (loss) $2,516,304 $(1,047,628) $(2,807,254)
DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(The Increase or Decrease in Cash and Cash Equivalents) (In U.S. Dollars)
Years Ended December 31,
2006 2007 2008
Cash flows from operating
activities:
Net income(loss) $1,664,816 $(2,905,337) $(4,718,370)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Minority interests 74,941 334,617 195,925
Depreciation 766,141 1,197,819 1,833,219
Imputed interest 79,674 -- --
Bad debts allowance 259,237 604,258 220,720
Inventory provision 545,446 296,072 1,239,816
Impairment of long-term investment -- 622,194 157,108
Loss on disposing assets -- -- 3,726
Stock compensation 2,134,342 1,206,091 571,505
Deferred tax asset (86,572) -- 53,522
Changes in operating assets and
liabilities:
Accounts receivable (541,888) (6,507,856) 3,079,557
Inventory (1,221,802) (3,170,378) (1,073,437)
Other receivables (152,056) (248,711) (134,174)
VAT recoverable (219,860) (184,913) 291,740
Prepayments and other assets (638,015) 459,832 586,062
Accounts payable 734,551 10,075,059 (4,012,725)
Accruals and other payable 610,856 1,732,009 (1,273,957)
Advance from customers (157,525) 295,936 79,739
Taxes payable (228,046) 88,034 (23,295)
Net cash provided by (used in)
operating activities 3,624,240 3,894,726 (2,923,319)
Cash flows from investing
activities:
Purchase of fixed assets (3,214,600) (6,172,666) (2,607,743)
Cash paid for acquisition of
entities -- (3,977,864) (1,194,520)
Long term investment (1,500,000) -- --
Disposal of marketable securities 1,056,122 -- --
Deposit for office building (1,808,773) -- --
Disposal of fixed assets -- -- 9,161
Due from related parties 21,538 -- --
Net cash used in investing
activities (5,445,713)(10,150,530) (3,793,102)
Cash flows from financing
activities:
Common share issued 12,000,000 -- --
Stock repurchase -- (429,295) (245,160)
Offering expenses (1,740,624) -- --
Due to related parties (469,590) 158,876 (727,161)
Proceeds from short-term bank loan -- -- 4,397,215
Capital infused by owners of North
Diamond 1,392,857 -- 737,500
Research funding advanced -- 236,225 391,882
Dividend paid (111,140) -- --
Net cash provided by (used in)
financing activities 11,071,503 (34,194) 4,554,276
Effect of changes in foreign
exchange rates 738,486 1,990,693 935,781
Net increase (decrease) in cash
and cash equivalents 9,988,516 (4,299,305) (1,226,364)
Cash and cash equivalents,
beginning of the year 10,561,516 20,550,032 16,250,727
Cash and cash equivalents, end of
the year $20,550,032 $16,250,727 $15,024,363
For more information, please contact:
Company Contact:
Viola Tse
Diguang International Development Co., Ltd.
Tel: +1-626-593-5486
Investor Relations Contact:
Sean Collins, Senior Partner
CCG Investor Relations
Tel: +1-310-477-9800 x202
Web: http://www.ccgirasia.com
