SHENZHEN, China, Aug. 15 /Xinhua-PRNewswire-FirstCall/ -- Diguang International Development Co., Ltd. (OTC Bulletin Board: DGNG) (“Diguang”) today announced financial results for the second quarter, ended June 30, 2008, of the Company’s 2008 fiscal year.
(Logo: http://www.prnasia.com/sa/200708301921.JPG )
-- Net revenue in Q2-2008 increased 89.9% to $16.9 million, compared to
$8.9 million in Q2-2007;
-- Gross profit in Q2-2008 was $2.2 million, advancing 71.8% from the $1.3
million recorded in Q2-2007; gross margin in Q2-2008 was 12.9%,
compared to 14.3% in Q2-2007;
-- The Company realized net income to common shareholders of $134,788 in
Q2-2008, compared to a net loss of $660,591 in Q2-2007;
-- Sales to international customers increased 79.7% to $12.9 million in
Q2-2008, compared to $7.2 million in Q2-2007; sales to domestic
customers increased 133.3% to $4.0 million from $1.7 million in Q2-2007;
-- The sale of CCFL products increased 122.6% in Q2-2008, to $10.7
million, compared to $4.8 million in Q2-2007; the sale of LED products
increased 34.2% to $5.5 million in Q2-2008, compared to $4.1 million in
Q2-2007 LED sales;
-- The Company earned revenues from new and recently introduced products,
including Liquid Crystal Modules (“LCM”) and LED general lighting
products, which accounted for $621,000 and $87,000, respectively.
Revenue for the second quarter advanced 89.9% to $16.9 million, from $8.9 million in the second quarter last year. The increase was primarily attributed to accelerated orders from Taiwanese and Korean customers to capture more market share in a slowing global market; continued large deliveries of mid size CCFL products to our key Korean customer; the significant shift from mid size CCFL to LED backlights as their recognition of our low cost solution, and the additional delivery of LCD module (“LCM”) assemblies, including LCD panel and backlight units.
International sales totaled $12.9 million for the quarter ended June 30, 2008, an increase of 79.7%, compared to $7.2 million in international sales for the quarter ended June 30, 2007. The increase was primarily driven by the increased demand for backlights by our customers, as well as for LCM assemblies using both CCFL and LED technologies.
Sales to domestic (China) customers were $4.0 million in the second quarter of 2008, a 133.3% increase from the $1.7 million reported in the second quarter of 2007. The increase in domestic sales was primarily attributed to the sales of mid-size LED products delivered to a new domestic customer.
Cost of sales was $14.7 million in the second quarter of 2008, up 93.0% from $7.6 million in the second quarter of 2007. The increase was primarily attributed to increased sales volumes and higher costs for the raw materials used in backlight production.
Gross margin for the second quarter of 2008 totaled 12.9%, a slight decline from 14.3% in the second quarter of 2007. The decline was primarily due to continuing pressure on prices due to competitive factors; an inability to transfer the pricing pressure to suppliers; the impact on average gross margin resulting from increased sales of CCFL LCD products; and pricing initiatives aimed at maintaining and capturing market share, as well as facilitating new products’ market penetration.
Total operating expenses for the second quarter of 2008 were $1.82 million, or 10.8% of sales, compared to $2.0 million, or 22.9% of sales in the second quarter of 2007. The decrease in operating expenses was mainly attributable to a 15.2% decrease in research and development expenses and a 14.6% decrease in general and administrative expenses, offset by an 11.3% increase in selling expenses.
Share-based compensation amounted to approximately $146,000 during the second quarter of 2008, a decrease of $12,000, or 7.6%, compared with $158,000 for the second quarter of 2007.
GAAP net income was $134,788, compared with a net loss of $661,000 for the quarter ended June 30, 2007. Both basic and diluted weighted average GAAP earnings per share were $0.01 for the second quarter of 2008, compared with a loss of $0.03 for both basic and diluted weighted average EPS in the second quarter of 2007. On a non-GAAP basis adjusted for stock-based compensation, net income was $278,915, or $0.01 per share.
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) (after adjusting for the items set forth in the reconciliation table below) for the second quarter of year 2008 was $859,556, or 5.1% of net revenue, compared to negative $210,727, or negative 2.4% of net revenue, in the second quarter of 2007. The increase in EBITDA for this quarter primarily resulted from management’s efforts to increase revenue and reduce expenditures. The Company computes EBITDA by adding minority interest, depreciation and amortization, non-cash stock-based compensation expense, interest expense, and provision for income taxes to its GAAP reported net income.
As of June 30, 2008, cash and equivalents were $7.6 million, plus short-term deposits of $1.5 million, compared with cash and equivalents of $16.3 million at December 31, 2007. The reduction in cash and equivalents is primarily attributable to an increase in accounts receivable because of the higher volumes of products shipped, increases in inventories, and capital expenditures for expanded manufacturing capacity. The Company has no long-term debt.
“The market for LCD backlights, especially in medium size units, has become extremely competitive in the weakening global economy,” observed Henry Song, President and Chief Executive Officer of Diguang. “Nonetheless, we were able to achieve record quarterly revenues as display manufacturers increasingly embrace our technology solutions and our value proposition. Some of our success derives from the strategic initiatives implemented late last year in restructuring our company into distinct business units. Not only does this structure nurture better operating efficiencies, but our ability to quickly shift labor, capital and material resources between and among the units provides us with a high degree of operational flexibility, allowing us to quickly respond to market opportunities.
“I am excited about the future,” Song continued. “Diguang’s LCD backlight business continues to grow and it is strengthened by the value added we offer our customers with liquid crystal module assembly and technology integration services. In addition, we received our first revenues from the LED general lighting initiative announced this past April. The energy savings and emissions reductions to customers adopting LED technology in general lighting are important business opportunities for us, but their implementation are also important opportunities for the Chinese people to improve our quality of life.”
“Diguang today is a much stronger company than a year ago,” Song concluded. “We have more customers. We have more products addressing an increased array of market opportunities. We have proven that we can earn a profit in challenging macroeconomic times. And with our LCM and LED general lighting initiatives, we have important and potentially significant sources of new business revenues in large, addressable markets that can benefit from our solutions.”
Highlights for the six months ended June 30, 2008
Net revenue was approximately $33.1 million for the six months ended June 30, 2008, an increase of $17.4 million, or 111.4%, compared to $15.7 million for the same period of the prior year.
Cost of sales was $28.3 million for the six months ended June 30, 2008, an increase of $15.3 million, or 117.5%, compared to $13.0 million for the same period of the prior year.
Overall gross margin for the six months ended June 30, 2008 was 14.6%, compared to 17.0% for the six months ended June 30, 2007.
The Company’s net profit during the six months ended June 30, 2008 was $303,518, compared to a net loss of $1.7 million for the six months ended June 30, 2007.
The diluted weighted average earnings per share was $0.01 for the six months ended June 30, 2008, compared to a loss of eight cents ($0.08) per share for the six months ended June 30, 2007. EBITDA for the first six months of year 2008 was $2.0 million, or $0.09 per share, compared to negative $356,671, or negative $0.02 per share for the six months ended June 30, 2007.
Reconciliation of GAAP Net Income and EBITDA to Net (Loss) Income
RECONCILIATION OF EBITDA TO NET (LOSS) INCOME
Three Months Ended June 30,
2007 2008
(Unaudited) (Unaudited)
Numerator:
Reported (loss) income $ -660,591 134,788
Minority interest 110,116 59,871
Depreciation and Amortization 264,282 464,959
Stock based compensation 157,872 144,127
Interest expenses (net) -101,855 64,028
Income tax provision 19,449 -8,217
EBITDA $-210,727 859,556
Basic EBITDA per share $ -0.01 0.04
Diluted EBITDA per share $ -0.01 0.04
RECONCILIATION OF EBITDA TO NET (LOSS) INCOME
Six Months Ended June 30,
2007 2008
(Unaudited) (Unaudited)
Numerator:
Reported (loss) income $-1,709,919 303,518
Minority interest 136,367 189,951
Depreciation and amortisation 503,415 964,979
Stock based compensation 785,020 283,252
Interest expenses (net) -91,003 122,454
Income tax provision 19,449 124,768
EBITDA $ -356,671 1,988,922
Basic EBITDA per share $ -0.02 0.09
Diluted EBITDA per share $ -0.02 0.09
Recent Developments
In July 2008, the Company participated in the fifth China International Solid State Lighting Exhibition (“CHINASSL”), the largest and most influential LED and solid state lighting event in China, in the Shenzhen Convention and Exhibition Center. Diguang has created a new Strategic Business Unit for LED lighting, organized to address market segments in government lighting, commercial lighting and household lighting. The Company introduced a variety of its energy-saving, environmentally friendly LED lighting products in that conference.
Teleconference and Webcast Information
Management will conduct a conference call and webcast to discuss 2008 second quarter financial results, ended June 30, 2008. The conference call and webcast will take place at 9:00 a.m. Eastern U.S. time on Friday, August 15, 2008. Anyone interested in participating should call 866-272-9941 if calling from within the United States, or 617-213-8895 if calling internationally; the passcode is 16400803.
There will be a replay available until August 22, 2008. To listen to the playback, please call 888-286-8010 if calling within the United States, or 617-801-6888 if calling internationally. Please use passcode 12087772 for the replay.
The event will also be webcast live through a link on the Company’s web site at http://www.diguangintl.com , where a webcast archive will be available for 90 days, and is 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.
Use of Non-GAAP Financial Measures
Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), 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.
About Diguang International Development Co., Ltd.
Diguang, through its subsidiaries, specializes in the research, development, production, sale and distribution of backlights, backlight technologies and LED general lighting products. A backlight is the typical light source of a liquid crystal display (LCD). The Company is focused on providing LED and CCFL backlights for international producers of televisions, monitors, cellular phones, digital cameras, DVDs and other home appliances. LED general lighting represents a new product initiative for Diguang, leveraging its core technology to offer business and consumers energy savings, as well as significant environmental advantages over currently used incandescent and fluorescent lighting technologies. Diguang currently develops an average of approximately 50 new products per month. Diguang is a Nevada corporation with its manufacturing subsidiary located in Shenzhen, PRC, and its sales and marketing subsidiary located in the British Virgin Islands.
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: performance of Diguang International’s web site, 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 STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME(LOSS)
(In US Dollars)
Six Months Ended Three Months Ended
June 30, June 30,
2007 2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
Revenues:
Revenues, net $15,658,508 $33,096,769 $8,896,421 $16,897,178
Cost of sales 13,002,302 28,276,106 7,626,714 14,715,749
Gross profit 2,656,206 4,820,663 1,269,707 2,181,429
Selling expense 962,741 782,981 337,193 375,415
Research and development
costs 558,347 651,603 393,849 333,869
General and administrative
expenses 3,114,642 2,461,218 1,302,389 1,111,965
Income(loss) from operations (1,979,524) 924,861 (763,724) 360,180
Interest income (expense),
net 91,003 (122,454) 101,855 (64,028)
Investment income (loss) 87,050 29,179 87,050 249
Other income 247,368 (213,349) 43,793 (109,959)
Income(loss) before income
taxes (1,554,103) 618,237 (531,026) 186,442
Income tax provision 19,449 124,768 19,449 (8,217)
Net income(loss) before
minority interest (1,573,552) 493,469 (550,475) 194,659
Minority interests 136,367 189,951 110,116 59,871
Net income(loss) to
common shareholders $(1,709,919) $303,518 $(660,591) $134,788
Weighted average common
shares outstanding
- basic 22,593,000 22,300,646 22,593,000 22,274,485
Earnings per share - basic (0.08) 0.01 (0.03) 0.01
Weighted average common
shares outstanding
- diluted 22,593,000 22,300,646 22,593,000 22,274,485
Earning per shares - diluted (0.08) 0.01 (0.03) 0.01
Other comprehensive income:
Net income (1,709,919) 303,518 (660,591) 134,788
Translation adjustment 487,199 1,859,372 319,473 721,189
Other comprehensive
income(loss) $(1,222,720) $2,162,890 $(341,118) $855,977
DIGUANG International DEVELOPMENT CO., LTD.
CONSOLIDATED BALANCE SHEETS
(In US Dollars)
December 31, June 30,
2007 2008
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 16,250,727 $ 7,635,851
Short term investment in marketable
securities -- 1,501,655
Accounts receivable, net of allowance
for doubtful accounts $680,784 and
$702,539 12,713,705 21,764,677
Inventories, net of provision $841,518
and $950,269 7,499,768 11,788,520
Other receivables, net of provision
$102,574 and $109,086 389,764 390,745
VAT recoverable 407,376 89,550
Advance to suppliers 904,203 1,628,603
Deferred tax asset 86,572 86,572
Total current assets 38,252,115 44,886,173
Investment, net of impairment $622,194
and $622,194 877,806 877,806
Property and equipment, net 17,449,871 18,479,851
Construction in progress -- 22,114
Total assets $ 56,579,792 $ 64,265,944
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 18,855,416 $ 25,388,240
Advance from customers 464,281 565,856
Accruals and other payables 3,358,199 2,316,262
Accrued payroll and related expense 795,690 652,227
Income tax payable 428,217 450,756
Amount due to related parties 1,465,790 876,122
Amount due to stockholders - current 1,100,000 1,650,000
Total current liabilities 26,467,593 31,899,463
Research funding advanced 245,730 261,332
Amount due to stockholders 1,100,000 --
Total non-current liabilities 1,345,730 261,332
Total liabilities 27,813,323 32,160,795
Minority interest 1,475,361 2,505,939
Stockholders’ equity:
Common stock, par value $0.001 per share,
50million shares authorized, 22,593,000
shares and 22,593,000 issued, 22,340,700
shares and 22,220,150 outstanding 22,593 22,593
Additional paid-in capital 20,028,955 20,312,207
Treasury stock at cost (429,295) (567,336)
Appropriated earnings 1,949,839 2,047,477
Retained earnings 3,127,110 3,332,990
Translation adjustment 2,591,906 4,451,279
Total stockholders’ equity 27,291,108 29,599,210
Total liabilities and stockholders’ equity $ 56,579,792 $ 64,265,944
DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In US Dollars)
Six Months Ended June 30,
2007 2008
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $(1,709,919) $303,518
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Minority interest 136,367 189,951
Depreciation 503,415 964,979
Inventory provision -- 55,321
Share-based compensation 785,020 283,252
Changes in operating assets and
liabilities:
Accounts receivable (4,597,189) (8,697,643)
Inventory (2,144,828) (4,136,591)
Other receivables (221,198) (3,663)
VAT recoverable 152,877 315,060
Prepayments and other assets 893,008 (896,937)
Accounts payable 2,567,994 6,366,846
Accruals and other payable 359,851 (1,124,691)
Advance from customers 319,810 93,650
Taxes payable 18,921 22,817
Net cash provided by (used in) operating
activities (2,935,871) (6,264,131)
Cash flows from investing activities:
Purchase of fixed assets (4,285,521) (1,788,752)
Disposal (purchase) of marketable
securities -- (1,501,655)
Cash paid for an acquisition transaction (1,977,864) --
Net cash used in investing activities (6,263,385) (3,290,407)
Cash flows from financing activities:
Stock repurchase -- (138,041)
Due to related parties 67,213 (1,093,119)
Capital infused by minority interest in
North Diamond -- 737,500
Net cash provided by financing
activities 67,213 (493,660)
Effect of changes in foreign exchange
rates 289,165 1,433,322
Net increase (decrease) in cash and cash
equivalents (8,842,878) (8,614,876)
Cash and cash equivalents, beginning of
the period 20,550,032 16,250,727
Cash and cash equivalents, end of the
period $11,707,154 $7,635,851
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 Elite
Tel: +1-310-477-9800 x202
Web: http://www.ccgelite.com
