omniture

Global Sources Fourth Quarter and Year End 2006 Results

Global Sources
2007-03-06 17:39 898

Quarterly Revenue Up 62% Compared to Fourth Quarter 2005

Driven by Successful China Sourcing Fairs

Annual 2006 Revenue Grew 39% Compared to 2005

NEW YORK, March 6 /Xinhua-PRNewswire-FirstCall/ -- Global Sources Ltd. (Nasdaq: GSOL) reported financial results for the fourth quarter and year ended Dec. 31, 2006.

(Logo: http://www.prnasia.com/sa/200701111135.jpg )

Highlights: Fourth Quarter 2006 Compared to Fourth Quarter 2005

* Revenue of $52.3 million was up 62 percent from $32.3 million.

-- Online revenue was $16.9 million, up 26 percent from $13.4 million.

-- Print revenue was $13.4 million, up 11 percent from $12.1 million.

-- Exhibitions revenue was $21.6 million, up 241 percent from

$6.3 million.

* Revenue from China was $30.1 million, up 69 percent from

$17.8 million.

* Deferred income and customer prepayments were $63.8 million at

December 31st, up 20 percent from $53.0 million.

During the fourth quarter, the company recorded two significant non-operating entries in accordance with generally accepted accounting principles (GAAP): a gain of $7.9 million related to the sale of 199 shares of its subsidiary eMedia Asia Ltd. and interest income thereon and an impairment charge of $743,000 on its HC International investment. Management defines non-GAAP net income as net income excluding the gain on the sale of shares to a minority shareholder, interest income related to the repayment of the promissory note, and the impairment charge on its HC International investment. Non-GAAP net income per diluted common share is defined as non-GAAP net income divided by the weighted average of diluted common shares outstanding. Management believes non-GAAP net income and non-GAAP net income per diluted common share are useful measures. Tables reconciling GAAP and non-GAAP measures follow in this press release.

GAAP net income was $15.3 million, or $0.36 per diluted share. Non-GAAP net income was $8.1 million, or $0.19 per diluted share. This compares to fourth quarter net income, GAAP and non-GAAP, of $4.5 million, or $0.11 per diluted share.

Chairman and CEO Merle A. Hinrichs said: "In 2006, our 39 percent growth in total revenue was driven primarily by 50 percent revenue growth from China. In terms of individual revenue lines, exhibitions were the key contributor with total exhibitions revenue growing 195 percent compared to last year. We sold nearly 13,000 booths at our China Sourcing Fairs in their first year at our new and larger venue in Hong Kong. Also, the launch of online marketplaces and magazines for new verticals combined with effective cross-selling drove double-digit year-over-year growth for our online services and magazines."

Highlights: Yearly Revenue $156.5 Million

For the year ended Dec. 31, 2006, revenue was $156.5 million, up

39 percent compared to $112.2 million for the year ended Dec. 31, 2005. The revenue mix for the year was 41 percent online, 31 percent print, 27 percent exhibitions and 1 percent miscellaneous, compared to 48 percent online,

38 percent print, 13 percent exhibitions and 1 percent miscellaneous in 2005. GAAP net income for the year was $27.9 million, or $0.66 per diluted share. Non-GAAP net income for the year was $20.7 million, or $0.49 per diluted share. This compares to 2005 net income, GAAP and non-GAAP, of $13.4 million.

"We enter 2007 with a more diversified revenue base and a larger number of customers. Our strategies to drive growth include penetrating the markets for our existing products; launching new online marketplaces, magazines and China Sourcing Fairs; and furthering our expansion into China's domestic B2B market," Hinrichs continued.

CFO Eddie Heng said: "In 2006, we generated cash provided by operating activities of $43.6 million. During the year, cash and securities grew over 30 percent to $155.8 million at December 31st, giving us even greater flexibility to take advantage of growth opportunities."

Financial Expectations: First Quarter and First Half 2007 Revenue Increase Up to 15 Percent

First quarter 2007 revenue is expected to be in the range of $33.5 million to $34.5 million, representing growth between 12 percent and 15 percent compared to the same quarter last year. First quarter 2007 earnings per diluted share, GAAP and non-GAAP, are expected to be between $0.11 and $0.13. This range represents growth between 10 percent and 30 percent, compared to $0.10 per diluted share in the first quarter 2006.

Revenue for the six-month period ended June 30, 2007 is expected to be in the range of $83.5 million to $86.5 million. Compared to $74.9 million for the first six months of 2006 this represents an increase of 11 percent to 15 percent. As noted previously, given that the China Sourcing Fairs were held for the first time in Hong Kong in 2006, the company continues to invest heavily to maximize their success and expects 2007 investments in existing and new China Sourcing Fairs to be similar to their revenue contribution.

Earnings per diluted share, GAAP and non-GAAP, for the six-month period ended June 30, 2007 are expected to be in the range of $0.22 to $0.26. This range is up 10 percent to 30 percent when compared to $0.20 per diluted share for the same period in 2006.

Heng added, "In the first half of the year, we plan to launch additional online marketplaces and associated magazines. In addition, our new China Sourcing Fair in Shanghai is scheduled for December 2007. As such, we expect organic revenue growth for the second half of 2007 to be greater than the first half of 2007."

Recent Corporate Highlights: Four New China Sourcing Fairs Scheduled for 2007; New Online Marketplaces and Magazines; Larger Buyer Community

-- Announced today that the board of directors declared a one for ten

bonus share issue on outstanding common shares. Shareholders of

record on March 16, 2007 will receive one additional common share for

every ten common shares held, of face value of $0.01 each. The bonus

share issue will be distributed on or about April 16, 2007.

-- Announced the launch of four new China Sourcing Fairs for 2007:

Underwear & Swimwear (Hong Kong, April and October); Gifts & Home

Products (Dubai, June); and Fashion Accessories and Baby & Children's

Products (Shanghai, December 2007, and June and December from 2008).

-- Agentrics, who serves 17 of the world's top 30 retailers, is scheduled

to hold Agentrics Sourcing World: Asia 2007 in April, in conjunction

with Global Sources' China Sourcing Fairs. As the co-host, Global

Sources plans to help buyers arrange meetings with manufacturers.

-- Launched online vertical marketplaces and monthly magazines for

Gifts & Premiums and Home Products.

-- Announced the launch of Security Products magazine effective April

2007 to accompany the existing online marketplace.

-- Held three China Sourcing Fairs in Hong Kong in October. More than

81,000 buyers from 170 countries and territories attended and were

able to view more than 7,000 booths.

-- Held the Ninth Annual Franchising China Conference & Exhibition in

November in Shanghai, Guangzhou and Beijing, which featured over

300 booths and 120 exhibitors.

-- Increased Global Sources' independently certified community of active

buyers to more than 560,000 at the end of the fourth quarter, an

18 percent increase compared to the same time last year.

-- Grew lead generation through Global Sources Online, which is measured

as requests for information from buyers to suppliers, to over

10 million for the 12 months ending Dec. 31, 2006. This is a

77 percent increase over the same period last year.

Conference Call for Global Sources Fourth Quarter and Year End 2006 Earnings

Global Sources plans to conduct a conference call at 8:00 a.m. ET on

March 6 (9:00 p.m. on March 6, 2007 in Hong Kong) to review these results in more detail. Investors in the United States may participate in the call by dialing (888) 212-8315, and international participants may dial

(1-706) 643-0144. Investors in Hong Kong may call (852) 3011-4515. A live webcast of the conference call is scheduled to be available on Global Sources' corporate site at http://www.investor.globalsources.com .

A webcast replay of the call is scheduled to be available on the company's corporate site for at least 30 days. A telephone replay of the call is also scheduled to be available through March 8, 2007. To listen to the telephone replay, dial (800) 642-1687, or (1-706) 645-9291 outside the United States, and enter pass code 8244322#. For those in the Hong Kong area, the replay number is (852) 3011-4541, with pass code 8244322#.

About Global Sources

Global Sources is a leading business-to-business (B2B) media company and a primary facilitator of two-way trade with Greater China. The core business is facilitating trade from Greater China to the world, using a wide range of English-language media. The other key business segment facilitates trade from the world to Greater China using Chinese-language media.

The company provides sourcing information to volume buyers and integrated marketing services to suppliers. It helps a community of over 560,000 active buyers source more profitably from complex, overseas supply markets. With the goal of providing the most effective ways possible to advertise, market and sell, Global Sources enables suppliers to sell to hard-to-reach buyers in 230 countries.

The company offers the most extensive range of media and export marketing services in the industries it serves. It delivers information on 1.8 million products and more than 150,000 suppliers annually through 13 online marketplaces, 11 monthly magazines, over 100 sourcing research reports and nine specialized trade shows which run 22 times a year across seven cities. Suppliers receive more than 10 million sales leads annually from buyers through Global Sources Online ( http://www.globalsources.com ) alone.

Global Sources has been facilitating global trade for 36 years. In mainland China it has over 1,600 team members in 44 locations, and a community of over 1 million registered online users and magazine readers for

Chinese-language media.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements.

-- Tables to Follow --

GLOBAL SOURCES LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars Thousands, Except

Number of Shares and Per Share Data)

At At

December 31 December 31

2006 2005

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents $25,192 $94,321

Available-for-sale securities

(Note 1) 130,603 23,982

Accounts receivable, net 6,468 5,545

Receivables from sales

representatives 13,238 5,659

Inventory of paper 889 866

Prepaid expenses and other current

assets 14,174 10,585

Total Current Assets 190,564 140,958

Property and equipment, net 28,374 28,178

Long term investments 100 100

Bonds held to maturity,

at amortized cost 289 463

Other assets 1,562 1,981

Total Assets $220,889 $171,680

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable $6,804 $5,484

Deferred income and customer

prepayments 62,036 52,624

Accrued liabilities 12,427 6,644

Income taxes payable 751 405

Total Current Liabilities 82,018 65,157

Liabilities for incentive and bonus

plans 102 307

Deferred income and customer

prepayments - long term 1,802 348

Deferred tax liability 403 436

Total Liabilities 84,325 66,248

Minority interest 2,913 6,191

Shareholders' equity:

Common shares, US$0.01 par value;

75,000,000 shares authorized;

42,271,144 (2005: 42,174,344)

shares issued and outstanding 423 422

Additional paid in capital (Note 2) 126,323 127,708

Retained earnings (deficit) 4,339 (21,199)

Less : Unearned compensation (Note 2) -- (7,900)

Accumulated other comprehensive

income (Note 1) 2,566 210

Total Shareholders' Equity 133,651 99,241

Total Liabilities and

Shareholders' Equity $220,889 $171,680

Note: 1. The Company recorded $14.5 million, being approximately 13.09%

equity interest in HC International at fair value based on the

closing share price of HCI, as at December 31, 2006, as

available-for-sale securities in the financial statements as at

December 31, 2006. The unrealized market gain of $2.3 million

has been credited to accumulated other comprehensive income,

shown under shareholders' equity.

Note: 2. The Company adopted SFAS No. 123(R), "Share Based Payment"

with effect from January 1, 2006. The unearned compensation

costs associated with the Employee Compensation Plans at the

beginning of the year 2006 were reversed as per SFAS No. 123(R).

GLOBAL SOURCES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Three months ended Year ended

December 31 December 31

2006 2005 2006 2005

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenue:

Online and other media

services (Note 3) $30,335 $25,558 $113,097 $97,062

Exhibitions 21,608 6,339 42,122 14,300

Miscellaneous 361 434 1,262 832

52,304 32,331 156,481 112,194

Operating Expenses:

Sales (Note 4) 15,451 9,173 50,380 34,415

Event production 9,169 1,987 18,414 3,920

Community (Note 4) 8,231 6,756 24,885 20,726

General and

administrative (Note 4) 10,605 9,262 38,945 34,666

Online services

development (Note 4) 1,145 960 4,499 4,235

Amortization of

software cost 328 329 1,250 1,335

Total Operating Expenses 44,929 28,467 138,373 99,297

Income from Operations 7,375 3,864 18,108 12,897

Interest and dividend

income 1,797 830 5,571 1,624

Gain on sale of

available-for-sale

securities -- 420 309 977

Gain on sale of shares

to minority

shareholder and

interest income

thereon (Note 5) 7,906 -- 7,906 --

Loss on investment, net (743) -- (743) --

Foreign exchange

losses, net (258) (2) (714) (80)

Income before Income Taxes 16,077 5,112 30,437 15,418

Income Tax Provision (323) (284) (899) (759)

Net Income before Minority

Interest $15,754 $4,828 $29,538 $14,659

Minority interest ($444) ($294) ($1,909) ($1,281)

Net Income before

cumulative effect of

change in accounting

principle $15,310 $4,534 $27,629 $13,378

Cumulative effect of

change in accounting

principle (Note 6) -- -- 251 --

Net Income $15,310 $4,534 $27,880 $13,378

Diluted net income

per share $0.36 $0.11 $0.66 $0.32

Shares used in diluted net

income per share

calculations 42,375,913 42,223,288 42,326,365 41,424,055

Note: 3. Online and other media services consists of:

Three months ended Year ended

December 31 December 31

2006 2005 2006 2005

(Unaudited) (Unaudited)(Unaudited) (Unaudited)

Online services $16,927 $13,446 $64,396 $53,829

Print services 13,408 12,112 48,701 43,233

$30,335 $25,558 $113,097 $97,062

Note: 4. Non-cash compensation expenses associated with the employee

equity compensation plans and Directors Purchase Plan included

under various categories of expenses are as follows:

Three months ended Year ended

December 31 December 31

2006 2005 2006 2005

(Unaudited) (Unaudited)(Unaudited) (Unaudited)

Sales $706 $195 $1,790 $505

Community 65 27 145 103

General and administrative 398 351 1,950 1,025

Online services development 39 52 181 315

$1,208 $625 $4,066 $1,948

Note: 5. The sale of 199 shares of our subsidiary eMedia Asia Ltd.

increased our net income and diluted net income per share for

both the quarter and the year ended December 31, 2006 by $7,906

and $0.19 respectively.

Note: 6. Represents the cumulative effect of change in accounting

principle, resulting from the adoption of SFAS No. 123(R) with

effect from January 1, 2006.

GLOBAL SOURCES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars Thousands, Except

Number of Shares and Per Share Data)

Year ended December 31

2006 2005

(Unaudited)

Cash flows from operating activities:

Net income $27,880 $13,378

Adjustments to reconcile net income

to net cash provided by

operating activities

Depreciation and amortization 4,678 3,975

Accretion of U.S. Treasury strips

zero % coupons (26) (37)

Profit on sale of equipment (30) (12)

Equipment written off 2 86

Unrealised dividend income on

available-for-sale securities -- (134)

Unrealised interest income on

available-for-sale securities (1,036) --

Bad debt expense 216 18

Non-cash compensation expense 4,066 1,948

Cumulative effect of change in

accounting principle (251) --

Income attributable to minority

shareholder 1,909 1,281

37,408 20,503

Changes in assets and liabilities:

Accounts receivables (1,139) (416)

Receivables from sales

representatives (7,579) (2,252)

Inventory of paper (23) (116)

Prepaid expenses and other

current assets (3,589) (7,525)

Long term assets 419 1,279

Accounts payable 1,320 686

Accrued liabilities and

liabilities for incentive and

bonus plans 5,578 563

Deferred income and customer

prepayments 10,866 22,777

Tax liability 313 130

Net cash provided by

operating activities 43,574 35,629

Cash flows from investing activities:

Purchase of property and equipment (4,876) (7,338)

Proceeds from sale of equipment 30 13

Proceeds from matured bonds 200 240

Purchase of available-for-sale

securities (531,979) (363,544)

Proceeds from sale of available-

for-sale securities 428,750 349,705

Repurchase of share dividends from

minority shareholder (5,187) --

Net cash used in investing activities (113,062) (20,924)

Cash flows from financing activities:

Proceeds from the issue of common

shares, net of share issue

expenses -- 38,303

Amount received towards directors

purchase plan 359 118

Net cash generated from

financing activities 359 38,421

Net (decrease) increase in cash and

cash equivalents (69,129) 53,126

Cash and cash equivalents,

beginning of the year 94,321 41,195

Cash and cash equivalents,

end of the year $25,192 $94,321

Supplemental cash flow disclosures:

Income tax paid $586 $629

GLOBAL SOURCES LTD. AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Three months ended Year ended

December 31 December 31

2006 2005 2006 2005

Net Income $15,310 $4,534 $27,880 $13,378

Less:

Gain on sale of shares to

minority shareholder

and interest income

thereon (7,906) 0 (7,906) 0

Loss on investment 743 0 743 0

Non-GAAP Net Income $8,147 $4,534 $20,717 $13,378

Non-GAAP diluted net

income per share $0.19 $0.11 $0.49 $0.32

Shares used in non-GAAP

diluted net income

per share calculations 42,375,913 42,223,288 42,326,365 41,424,055

Non-GAAP Net Income:

Non-GAAP net income is defined as Net Income adjusted for the following:

(i) A gain of $7.9 million related to the sale 199 shares of its

subsidiary eMedia Asia Ltd. minority shareholder and interest

income thereon;

(ii) An impairment charge of approximately $743,000 on the company's HC

International investment.

For financial matrix, please visit: http://xprnnews.xfn.info/gs/20070306/GSOL_Q406_matrix.pdf

Global Sources Press Contact in Asia:

Camellia So

Tel: +852-2555-5021

Email: cso@globalsources.com

Global Sources Investor Contact in Asia:

Eddie Heng

Tel: +65-6547-2850

Email: eheng@globalsources.com

Global Sources Press Contact in U.S.:

James W.W. Strachan

Tel: +1-602-978-7504

Email: strachan@globalsources.com

Global Sources Investor Contacts in U.S.

Kirsten Chapman & Moriah Shilton

Lippert/Heilshorn & Associates, Inc.

Tel: +1-415-433-3777

Email: kchapman@lhai.com

Source: Global Sources
collection