SHANGRAO, Jiangxi, China, April 1, 2008 /Xinhua-PRNewswire-FirstCall/ -- Fuda Faucet Works, Inc. (OTC Bulletin Board: FUFW) ("Fuda Faucet" or "the Company"), a Chinese company engaged in the business of developing, manufacturing, marketing and distributing mid-tier European style brass faucets, spouts and fittings to the international markets, today announced its financial results for the fiscal year ended December 31, 2007.
Fiscal Year 2007 Highlights
-- Net sales increased 122% in 2007 to $25.6 million
-- Gross profit increased 125% in 2007 to $5.2 million
-- Gross profit margin increased to 20.2% from 20.0% in 2006
-- Operating income increased 135% in 2007 to $5.0 million
-- Net income increased 90% in 2007 to $3.5 million, or $0.30 per share
(diluted)
-- Adjusting net income to exclude the income related to the sale of
patents in the third quarter of 2007, net income would be $2.9 million,
or $0.25 per share (diluted)
-- Commenced sales to customers in Russia and Nigeria
-- Completed reverse merger transaction to become a publicly traded
company in December 2007
-- Completed a $3.4 million private placement financing in December 2007
-- Started construction of new manufacturing facility to increase
production capacity to 3.5 million sets per year
"We are delighted to see a triple-digit growth in our top and bottom lines in 2007, as we continued to receive high-value purchase orders from our existing clients," said Ms. Yiting Wu, Chief Executive Officer of Fuda Faucet. "Our expansion into the European and African markets, including sales to Russia and Nigeria during the second half of 2007 are part of the solid growth strategy we have put in place to expand our footprint in new international markets."
Full Year 2007 Results
During the year ended December 31, 2007, net revenues were $25.6 million, an increase of 122.1% from $11.5 million for 2006. The increase in revenue was driven by increased sales to target markets in the Middle East, mostly driven by strong demand in the construction industry in the region. Sales to the Middle East market represented 88% of total revenues in 2007, as compared to 61% of total revenues in 2006. Gross profit in 2007 was $5.2 million, an increase of 125% from $2.3 million in 2006. Gross margin was slightly up at 20.2% in 2007, compared to 20.0% in 2006. Operating income increased to $5.0 million or 135% in 2007 from $2.1 million for the same period in 2006. Operating margin during 2007 was 19.2%, up from 18.1% a year ago. Net income for 2007 was $3.5 million, or $0.30 per diluted share, an increase of 90% from $1.8 million, or $0.17 per diluted share, in 2006. Earnings per share figures were calculated using a diluted share count of 11.4 million shares for 2007 and 10.7 million shares for 2006. Adjusting net income to exclude the income related to the sale of patents in the third quarter of 2007, net income would have been $2.9 million, or $0.25 per share (diluted). The increase in weighted average shares results from the shares issued in the private placement completed in December 2007.
Financial Condition
As of December 31, 2007, the Company had cash and cash equivalents of $0.2 million and working capital of $8.0 million. Accounts receivable were $7.5 million, and days sales outstanding were 107 days for the year versus 101 days for the prior year. At December 31, 2007, the Company had short-term debt outstanding of $5.3 million and shareholders’ equity of $12.7 million. Generally the company sees its highest revenues being generated in the first two quarters of the year. Inventory build up is expected to decrease, as the Company expects to sell its products during the early part of 2008. Cash flow from operation is expected to improve once we collect cash from our customers, reduce inventory and increase revenues.
In 2007, the Company incurred capital expenditures of $2.4 million, which was related to the construction of a new manufacturing facility. The Company expects the construction of the facility to be completed soon. The new facility, to be located in Yiyang, Jiangxi, is expected to enable the Company to increase its production capacity to 3.5 million sets per year from the present level of 1.2 million sets per year. In addition, the net proceeds from the December 2007 private placement were used to purchase new equipment.
Business Outlook
"Our company sees growth in sales from our target markets. With the beginning of our sales to Russia and Nigeria as well as our strengthened distribution system in Dubai, which markets throughout the entire Middle East, we are very confident in our business model," said Ms. Wu Yiting, CEO of Fuda Faucet.
Use of Non-GAAP Financial Measures
GAAP results for the year ended December 31, 2007 includes a one-time non-cash income generated from the transfer of patents in the third quarter of 2007. To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company’s management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company’s ongoing business as well as its historical performance. A reconciliation of adjustment to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered 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 Fuda Faucet Works, Inc.
Jiangxi Yiyang Fuda Copper Co., Ltd. was founded by Ms. Wu Yiting, in Yiyang County, Jiangxi Province of the People’s Republic of China, in November 1995. When Fuda started its operations in 1995, its business comprised of copper re-processing. In 2002, the Company started production of European style brass faucets and related spouts and fittings for the Chinese market. By 2004, Fuda started selling its products to international markets. Presently, Fuda Faucet engages in the business of developing, manufacturing, marketing and distributing a wide range of brass faucets and related spouts and fittings. The products are manufactured by Fuda for Fuda Faucet. The Company manufactures all its products in China and exports most of them to international markets.
Safe Harbor Statement
This announcement contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the company’s ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems; compliance with laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
-- Financial Tables to Follow --
FUDA FAUCET WORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(AUDITED)
(US dollars)
Item Years ended December 31,
2007 2006
Net sales from unrelated parties 18,566,873 11,510,199
Net sales from related parties 7,020,721 --
Net sales - Total 25,587,594 11,510,199
Cost of sales (exclusive of items
shown separately below) 20,409,749 9,211,533
Gross profit 5,177,845 2,298,666
Operating expenses:
Selling expenses 275,634 72,335
General and administrative 432,427 106,845
Officers’ compensation 24,353 22,612
Depreciation and amortization 39,426 8,701
Consulting and professional fees 73,433 --
Total operating expenses 845,273 210,493
Income from Transfer of patents - net 576,493 --
Operating income 4,909,065 2,088,173
Reserve acquistion costs (916,908) --
Other income 38,060 --
Interest expenses (371,334) (263,061)
Foreign exchange loss (198,373) --
Net income 3,460,510 1,825,112
Other comprehensive income
Foreign currency translation
adjustment 578,147 188,272
Comprehensive income 4,038,657 2,013,384
Earnings per common share
Basic 0.32 0.17
Diluted 0.30 0.17
Weighted average number of common
shares outstanding
Basic 10,725,440 10,725,440
Diluted 11,444,444 10,725,440
See notes to financial statements.
FUDA FAUCET WORKS, INC.
CONSOLIDATED CASH FLOWS STATEMENTS
(AUDITED)
(US dollars)
Item Years ended December 31,
2007 2006
Cash flows from operating activities:
Net income 3,460,510 1,825,112
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 202,659 154,478
Gain from transfer of patents (576,493) --
Amortization of fair value of
warrants and stocks as
compensation 39,570 --
(Increase) decrease in:
Accounts receivable 2,685,326 (1,792,799)
Due from related parties -
trade (6,996,322) --
Prepayments to suppliers 357,608 (361,489)
Inventories (3,153,039) (2,089,845)
Other current assets (105,246) (31,092)
Increase (decrease) in:
Accounts payable (31,115) 597,775
Due to related parties-trade 20,189 55,282
Accrued expenses 76,524 (8,116)
Other payables 8,744 31,991
Net cash used in operating
activities: (4,011,085) (1,618,703)
Cash flows from investing activities:
Purchase of fixed assets (2,354,500) --
Proceeds from transfer of patents 612,451 --
Net cash used in investing activities (1,742,049) --
Cash flows from financing activities:
Proceeds from issuance of preferred
stock and warrants 3,043,000 --
Proceeds from short-term bank loans 13,576,349 6,462,023
Repayment of short-term bank loans (12,363,917) (6,106,010)
Loans from related parties 4,596,921 658,702
Repayment to related parties (4,521,931) (64,031)
Loans from empolyees 932,657 --
Repayment to employees (932,657) --
Net cash from financing activities 4,330,422 950,684
Effect of exchange rate changes on
cash and cash equivalents: 1,211,318 185,821
Cash and equivalents
Net increase (decrease) in cash and
equivalents (211,395) (482,198)
Cash and equivalents, beginning of
year 380,714 862,912
Cash and equivalents, end of year 169,319 380,714
Supplemental Disclosures of Cash flow
Information:
Cash paid for interest 316,846 268,164
Cash paid for income taxes -- --
Non-cash investing and financing
activities:
Common stock issued as
compensation to financing
consultants 833,252 --
Warrants issued to an investor
relation consultant 68,613 --
See notes to financial statements.
FUDA FAUCET WORKS, INC.
CONSOLIDATED BALANCE SHEETS
(AUDITED)
(US dollars)
Item December 31,
2007 2006
ASSETS
Current assets
Cash and cash equivalents 169,319 380,714
Accounts receivable 487,471 3,172,797
Due from related parties - trade 6,996,322 --
Prepayments to suppliers 14,326 371,934
Inventories 8,260,479 5,107,440
Other current assets 251,619 83,478
Total current assets 16,179,536 9,116,363
Property, plant and equipment
Land use right 869,251 813,136
Buildings 1,180,427 1,103,277
Machinery and equipment 758,619 692,459
Automobiles 128,495 84,617
Office equipment 72,801 3,022
Property plant and equipment - total 3,009,593 2,696,511
Less: accumulated depreciation (777,600) (574,941)
Property plant and equipment - net 2,231,993 2,121,570
Construction in progress 1,867,513 --
Other long-term assets - idle assets
Machinery and equipment - net 331,324 309,942
Land use right - net 184,205 172,314
Total assets 20,794,571 11,720,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans 5,252,594 3,793,205
Accounts payable 686,114 717,229
Due to related parties-trade 1,189,152 1,168,963
Due to related parties- non-trade 819,802 546,345
Accrued expenses 112,280 35,756
Other payables 81,143 39,327
Total current liabilities 8,141,085 6,300,825
Total Liabilities 8,141,085 6,300,825
Commitments and Contingencies
Stockholders’equity
Common stock - 0.001 par value;
110,000,000 shares authorized;
10,725,440 issued and
outstanding shares on December
31, 2007 10,725 10,725
Preferred stock, 0.001 par value;
20,000,000 shares authorized;
3,090,909 share issued and
outstanding on December 31, 2007 3,091 --
Additional paid-in capital 3,784,970 592,596
Surplus reserve 260,430 260,430
Retained earnings 7,753,585 4,293,075
Accumulated other comprehensive
income 840,685 262,538
Total stockholders’equity 12,653,486 5,419,364
Total liabilities and
stockholders’equity 20,794,571 11,720,189
See notes to financial statements.
Non-GAAP Net Income 2007 2006
Net Income (Loss)
Adjusted Amount $2,884,017 $1,825,112
Adjustment
Other income from Transfer of Patents
- net (1) $ 576,493 $ --
Amount per consolidated statement of operations $3,460,510 $1,825,112
(1) One-time income from Transfer of Patents - net, in the third
quarter of 2007
For more information, please contact:
Fuda Faucet Works, Inc.
Ms. Yiting Wu, CEO
Tel: +86-793-588-7178
Email: wyt1645@163.com
CCG Elite Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
