SHENZHEN, China, Nov. 14 /Xinhua-PRNewswire/ -- Diguang International Development Co., Ltd. (OTC Bulletin Board: DGNG) ("Diguang") today announced financial results for the third quarter, ended September 30, 2007, of the Company's 2007 fiscal year.
(Logo: http://www.prnasia.com/sa/200708301921-min.JPG )
-- Net revenues in Q3 2007 increased 90.5% compared to Q3 2006, to $15.7
million from $8.3 million
-- The Company realized net income of $781,443 in Q3 2007 compared to
$669,316 in Q3 2006
-- Sequentially, the Company earned net profits of $781,443 for Q3 2007,
compared to a net loss of $647,598 in Q2-2007
-- Sales to international customers increased 126.1%, to $13.6 million in
Q3 2007 compared to $6.0 million in Q3 2006
-- LED product sales increased to 47.6% of total sales revenue in Q3 2007,
from 35.0% in Q3 2006; CCFL products accounted for 52.4% of total sales
revenue compared to 65.0% for the prior-year period.
-- The sale of LED products increased 159% in Q3-2007, to $7.5 million,
compared to $2.9 million in Q3-2006 LED sales
-- Major manufacturing facilities located in Central, Eastern and Southern
China each contributed to overall profitability in Q3-2007
-- The global shift from CCFL to LED backlight gained traction in Q3,
rewarding the Company's early investments in LED technology
-- 200,000 common shares were repurchased in Q3-2007 at an average price
of $1.70 per share
"Due to the tremendous sales growth in medium size display products, particularly among our international customers, the third quarter of 2007 was an important period for us," said Henry Song, President and Chief Executive Officer of Diguang International. "Our earlier R&D efforts focused on LED-based backlight technology, as well as our increasing emphasis on medium-size display products, are producing the desired results. These operational trends are among the major drivers in our transition from loss to profitability.
"Even while the market was soft in the past several quarters," Song continued, "we were preparing to take advantage of growing global demand for LCD displays with our market share initiatives and our manufacturing initiatives. From the beginning we have been preparing for the shift in consumer demand from CCFL to LED technology with our R&D investments. LED displays produce higher contrast, lower power usage, and have a longer life cycle. More important, LED products have a more favorable impact on the environment in which we live.
"But our preparation has not just been in marketing," Song asserted, "but in company-wide strategic planning. For instance, our newly acquired manufacturing facilities in East China and Central China were specifically chosen because they are in key geographic, economic and demographic locations, and allow us to better server our customers. In addition, during the third quarter we reorganized our business units into profit centers, accountable unto themselves, and we have already seen many improvements in our operating efficiency.
"Our well-executed corporate strategy," Song concluded, "enhances our overall competitiveness, increases our exposure to the international markets and strengthens our ability to serve large global customers,"
Three Months Ended September 30, 2007
Revenues in the third quarter increased 91% to $15.7 million from $8.3 million in the prior year. The increase was primarily attributed to increased demand from TFT-LCD panel assemblers; growing demand for medium-size backlights, especially LEDs; and an increase in backlight deliveries to large international customers in Taiwan and Korea.
International sales totaled $13.6 million for the quarter ended September 30, 2007, and increase of 126% compared to the $6.0 million in international sales for the corresponding period ended September 30, 2006.
Sales to domestic (China) customers were $2.1 million in Q3-2007, a 5% decline from the $2.2 million reported in Q3-2006. The decline in domestic revenue is primarily attributed to lower unit prices in the increasingly competitive China market.
Cost of sales was $12.7 million in the 2007 third quarter, an increase of $7.5 million, or 145.2%, compared to $5.2 million for the same period of the prior year, reflecting higher sales volumes and higher costs for raw materials in newly developed products.
Gross margin for the third quarter of 2007 totaled 18.9%, a decline from the 37.0% recorded for the third quarter of 2006, primarily due to industry pricing pressure on legacy products and Company pricing initiatives to introduce new products and capture market share.
Total operating expenses for the third quarter of 2007 were $2.5 million, or 16% of sales, compared to $2.2 million, or 27.2% of sales, for the same quarter of the prior year. Selling expense increased 94.9% in Q3-2007, to $658,000; research and development expenses increased 41.8%, to $387,000; and general and administrative expenses decreased 9.5%, to $1.5 million.
Share-based compensation amounted to approximately $110,000 during the third quarter of 2007, a decrease of $685,000, or 86%, compared with $795,000 for the same period of the prior year. The decrease in share-based compensation reflected the resignation of the former CFO and two independent directors in the second quarter ended June 30, 2007.
The Company's income tax provision for the third quarter of 2007 was approximately $31,000, a decrease of $179,000 compared to $210,000 for the year ago period. The decrease was primarily attributable to the decrease in estimated taxable loss from Diguang Electronics. The estimated taxable loss for Diguang Electronics for the quarter ended September 30, 2007 was $203,000, compared to a taxable income of $2.1 million for the prior period.
Net income increased 17% in Q3-2007, to $781,000, compared with $669,000 in net income for the same period of the prior year. Diluted weighted average earnings per share totaled $0.035 for the three months ended September 30, 2007, which compared to $0.029 for the three months ended September 30, 2006. Without the non-cash expenses noted, third-quarter net income on a non-GAAP basis would have been $1.4 million, or $0.06 per share.
Highlights for the Nine Months Ended September 30, 2007
Net revenue was approximately $31.4 million for nine months ended September 30, 2007, an increase of $5.4 million or 20.7% compared to $26.0 million for the same period of the prior year.
Cost of sales was $25.9 million for the nine months ended September 30, 2007, an increase of $9.3 million, or 56%, compared to $16.6 million for the same period of the prior year.
Overall gross margin for the nine months ended September 30, 2007 was 18.9%, compared to 36.1% for the nine months ended September 30, 2006.
Selling expenses were $1.6 million for the nine months ended September 30, 2007, compared to $1.1 million for the year ago period.
Research and development expenses increased 9.4%, to $945,000, compared to $864,000 for the same period of the prior year
General and administrative expenses increased 18.1%, to $4.3 million, compared to $3.6 million for the prior year period.
Income tax provision for the nine months ended September 30, 2007 declined to $51,000, compared to $545,000 for the prior period.
The Company's net loss was $939,000 for the nine months ended September 30, 2007, compared with $3.5 million in net income for the same period of the prior year.
The diluted weighted average loss per share was $0.045 for the nine months ended September 30, 2007, compared to $0.17 in earnings per share for the nine months ended September 30, 2006. Without the non-cash expenses, nine-month net income on a non-GAAP basis would have been $2.0 million, or $0.049 per share.
At September 30, 2007, Diguang had total assets of $49.9 million, cash and cash equivalents of $11.9 million, accounts receivable of $16.5 million, inventories of $7.4 million, working capital of $21.1 million, and no long-term debt. Shareholders' equity was $30.3 million, up from $29.6 million at December 31, 2006.
Teleconference and Webcast Information
Management will conduct a conference call and webcast to discuss financial results for the third quarter and nine months, ended September 30, of its 2007 fiscal year. The conference call and webcast will take place at 8:00 a.m. Eastern (U.S.) Time, on Wednesday, November 14, 2006. Anyone interested in participating should call 800-260-8140 if calling from within the United States, or 617-614-3672 if calling internationally; the passcode is 25325893.
There will be a replay available until November 21, 2006. 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 25894399 for the replay.
The event will also be webcast live and a webcast archive will be available for 90 days. The webcast will be available at:
http://phx.corporate-ir.net/playerlink.zhtml?c=137803&s=wm&e=1416191 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 and backlight technologies. 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. 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, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars)
Nine Months Ended Three Months Ended
September 30, September 30,
2006 2007 2006 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Revenues, net $25,991,193 $31,378,156 $ 8,252,019 $ 15,719,648
Cost of sales 16,600,268 25,901,467 5,199,144 12,749,505
Gross profit 9,390,925 5,476,689 3,052,875 2,970,143
Selling expense 1,099,820 1,620,372 337,441 657,631
Research and
development
costs 863,884 945,399 272,659 387,052
General and
administrative
expenses 3,644,061 4,303,260 1,631,319 1,476,831
Income (loss) from
operations 3,783,160 (1,392,342) 811,456 448,629
Interest income
(expense), net 113,685 169,319 8,299 84,063
Investment income
(loss) 35,392 119,260 7,135 (24,802)
Other income 64,940 432,827 52,455 386,018
Income (loss) before
income taxes 3,997,177 (670,936) 879,345 893,908
Income tax provision 545,059 50,668 210,029 31,219
Net income (loss)
before minority
interest 3,452,118 (721,604) 669,316 862,689
Minority interests 217,614 81,246
Net income (loss) $ 3,452,118 $ (939,218) $ 669,316 $ 781,443
Weighted average
common shares
outstanding
- basic 21,383,960 22,590,794 22,593,000 22,586,407
Earnings (loss) per
share - basic 0.16 (0.04) 0.03 0.03
Weighted average
common shares
outstanding
- diluted 21,624,765 22,590,794 22,814,979 22,586,407
Earning (loss) per
shares - diluted 0.16 (0.04) 0.03 0.03
Other comprehensive
income (loss):
Net income (loss) 3,452,118 (939,218) 669,316 781,443
Translation
adjustment 360,862 1,107,917 252,488 620,718
Other comprehensive
income (loss) $ 3,812,980 $ 168,699 $ 921,804 $ 1,402,161
DIGUANG INTERNATIONAL DEVELOPMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars)
December 31, September 30,
2006 2007
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 18,910,808 $ 11,945,287
Accounts receivable, net of allowance for
doubtful accounts of $751,145 and
$764,451 5,006,649 16,497,479
Trade receivable from a related party 246,337 --
Inventories, net of provision $545,446
and $899,831 4,008,445 7,418,700
Advance to suppliers 756,208 572,943
Prepayment and other receivables 215,569 503,423
VAT recoverable 220,793 50,573
Amount due from related parties 55,997 67,798
Deferred tax asset 86,572 90,168
Loan receivable from a related party 2,050,204 2,252,829
Total current assets 31,557,582 39,399,200
Investment 1,500,000 1,500,000
Property and equipment, net 2,672,338 9,005,349
Prepayment for purchasing office space 1,969,462 --
Total assets $ 37,699,382 $ 49,904,549
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,685,836 $ 14,567,676
Advance from customers 177,184 266,707
Accruals and other payables 1,575,933 2,529,870
Accrued payroll and related expense 342,531 581,775
Income tax payable 335,672 381,394
Total current liabilities 8,117,156 18,327,422
Total liabilities 8,117,156 18,327,422
Minority interest -- 1,312,071
Stockholders' equity:
Common stock, par value $0.001 per
share, 50 million shares authorized,
22,593,000 shares and 22,593,000
shares outstanding 22,593 22,593
Additional paid-in capital 14,193,773 15,088,702
Treasury stock at cost -- (340,000)
Appropriated earnings 1,294,578 1,294,578
Retained earnings 13,202,629 12,222,613
Translation adjustment 868,653 1,976,570
Total shareholders' equity 29,582,226 30,265,056
Total liabilities and stockholders'
equity $ 37,699,382 $ 49,904,549
DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars)
Nine Months Ended
September 30,
2006 2007
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ 3,452,118 $ (939,218)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Minority interest -- 217,614
Depreciation 195,987 569,146
Share-based compensation 1,855,713 894,929
Inventory provision -- 354,385
Changes in operating assets and liabilities:
Accounts receivable (227,901) (9,752,754)
Inventory (1,169,655) (3,262,732)
Prepayment and other receivable 175,076 (176,741)
VAT recoverable -- 169,314
Advance to suppliers -- 146,625
Accounts payable 173,396 7,521,096
Accruals and other payable 457,002 863,123
Advance from customers (333,194) 94,908
Taxes payable (4,658) 44,454
Net cash provided by (used in) operating
activities 4,573,884 (3,255,851)
Cash flows from investing activities:
Purchase of plant, property and equipment (689,189) (3,829,854)
Purchase of marketable securities 331,814 --
Long term investment (1,500,000) --
Due from related parties (432,137) (128,869)
Business acquisition, net of cash acquired -- (469,145)
Deposit for office building (1,824,161) --
Net cash used in investing activities (4,113,673) (4,427,868)
Cash flows from financing activities:
Dividend paid (111,140) --
Stock purchase-back -- (340,000)
Gross proceeds from issuing 12 million
shares 12,000,000 --
Due to related parties (135,820) --
Offering expense (1,714,906) --
Net cash provided by financing activities 10,038,134 (340,000)
Effect of changes in foreign exchange rates 309,819 1,058,198
Net increase (decrease) in cash and cash
equivalents 10,808,164 (6,965,521)
Cash and cash equivalents, beginning of the
period 10,054,568 18,910,808
Cash and cash equivalents, end of the period$ 20,862,732 $ 11,945,287
For more information, please contact:
Company Contact:
T.C. Shen, Assistant to the President
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
