Strong Growth Realized in Revenue and Income
- Revenue of $20.5 Million, up 140%
- Net Income of $1.4 Million
SHENZHEN, China, Aug. 19 /PRNewswire-Asia-FirstCall/ -- Home System Group, Inc. (OTC Bulletin Board: HSYT) ("Home System" or the "Company"), a company engaged in the production and distribution of household appliances such as gas grills, water pumps, juicers, decorative lamps, ceiling fans and stainless steel containers, today announced its financial results for the three and six months ended on June 30, 2009.
Financial Highlights:
Sales for the three months ended June 30, 2009 increased to $20.5 million from last year's comparable period level of $8.6 million. This $11.9 million increase (or 140%) benefited from the Weihe acquisition in October of 2008, which contributed $9.7 million of this increase. The Company also realized strong growth in its sales of barbeque sets, which were partially offset by lower skateboard sales. Sales for the six months ended June 30, 2009 were $36 million, an increase of $19.7 million (or 121%) over the six months ended June 30, 2008. The 2009 results included Weihe revenue of $17.6 million.
Net income for the second quarter of 2009 was $1.4 million, with diluted earnings per share of $0.02. This represents a significant improvement from a loss of $0.3 million recorded in the same period of 2008. This improvement was the result of revenue growth and lower raw material costs. The net income for the six months ended June 30, 2009 was $3 million, with diluted earnings per share of $0.05. This reflects improvement of $5 million as compared to last year's net loss of nearly $2.1 million, with a corresponding net loss per share of $0.03. The net income for the first six months of 2009 also reflected the strong growth in revenue and a reduction in the level of input costs.
Strong Financial Results Aided by Reduced Raw Material Costs:
During the three month and six month periods ended June 30, 2009, the Company benefited from increases in overseas product demand for barbeque grills and ceiling fans from its largest customers, particularly during the second quarter.
The significant increases in net income for the three and six months ended June 30, 2009 were primarily due to the increased revenue levels as discussed above, as well as solid improvements in the Company's gross profit margins. Gross profit margin (loss) as a percentage of revenue for the second quarter and first half of 2009 increased to 19.7% from 5.3%, and 19.7% from (3.2%), respectively. These improvements reflected Weihe's higher margins as well as lower raw material prices, especially in steel.
Financial Conditions:
As of June 30, 2009, the Company recorded total liabilities and shareholders' equity at $103.1 million, of which total shareholders' equity was $14.8 million, and it had a cash balance of $7.7 million. As of June 30, 2009, the Company had current assets of $69.1 million and current liabilities of $84.2 million. A total of 200 million shares were authorized and 62,477,949 shares were issued and outstanding at June 30, 2009.
For the six months ended June 30, 2009, the Company realized a net cash increase of $6.1 million. This consisted of a net cash outflow of $3.1 million from operations, and a net cash inflow of $9.2 million from financing activity.
On September 23, 2008, Home System entered into a Share Purchase Agreement with Asia Forever Investment Limited ("Asia Forever") and Asia Forever's shareholders (the "Shareholders"), pursuant to which the Company agreed to acquire 100% of the ownership interests in Asia Forever from the Shareholders for approximately $39.5 million (RMB 270 million). On October 1, 2008, the Company issued promissory notes ("Notes") to the Shareholders equivalent to approximately $31.4 million as partial payment of Asia Forever's purchase price. The Notes bear no interest, and $1.8 million of the principal was to be repaid by December 31, 2008, and the remaining principal amount of $29.6 million (RMB 202.5 million) was to be repaid in three equal semi-annual installments starting at June 30, 2009.
On June 30, 2009, the Company entered into a Supplement Agreement ("Supplement Agreement") with the Shareholders which amended the original payment terms for the Notes. Pursuant to the Supplement Agreement, the $1.8 million past due payment from December 31, 2008, and the $9.9 million payment due on June 30, 2009, would now consist of: (i) a payment of $4.4 million on June 30, 2009 (ii) two payments of $0.7 million by July 31, 2009 and by December 31, 2009; (iii) the transfer of certain buildings consisting of offices and production facilities which were valued approximately $6 million. After these transactions, the Company would have two payments remaining on these Notes of approximately $9.9 million (RMB 67.5 million) each, due on December 31, 2009 and June 30, 2010.
About Home System Group:
Home System Group is primarily engaged in the production of a variety of small household appliances, including stainless steel gas grills and ovens, gas and electric heaters, residential water pumps, ceiling and table fans, decorative lamps, LEDs and energy-saving lamps. Its products are sold through distributors to retailers in China, America, Europe, Australia, Africa, and Southeast Asia. For more information, please visit: http://www.homesystemgroup.com .
FORWARD-LOOKING STATEMENTS:
This document includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning future acquisitions, estimates of, and increases in, production, cash flows and values, statements relating to the continued advancement of Home System Group's products and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," and similar expressions denote forward-looking statements. Although Home System Group believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include, but are not limited to, those set forth in our reports filed with the Securities and Exchange Commission, together with the risks discussed in our press releases and other communications to shareholders issued by us from time to time, such as our ability to raise capital as and when required, the availability of raw products and other supplies, competition, the costs of goods, government regulations, and political and economic factors in the People's Republic of China in which our subsidiaries operate. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Home Systems Group undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events.
For more information, please contact:
Home System Group
Eva Wang
VP of Corporate Development
Tel: +1-347-624-5699
Email: vp@homesystemgroup.com
Financial Statements
HOME SYSTEM GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
NET SALES $20,537,169 $8,575,118 $35,966,283 $16,253,607
COST OF SALES $16,499,881 8,124,279 28,156,419 16,772,303
GROSS PROFIT
(LOSS) $4,037,288 450,839 $7,809,864 (518,696)
OPERATING
EXPENSES 1,548,697 780,236 2,963,472 1,583,315
INCOME (LOSS) FROM
OPERATIONS 2,488,591 (329,397) 4,846,392 (2,102,011)
OTHER INCOME
(EXPENSE)
Other income 173,020 68,260 234,755 67,001
Interest
expenses, net $(703,114) (16,993) (1,073,502) (27,835)
(530,094) 51,267 $(838,747) 39,166
INCOME (LOSS)
BEFORE
INCOME TAXES 1,958,497 (278,130) 4,007,645 (2,062,845)
INCOME TAXES 512,930 -- 1,035,555 --
NET INCOME
(LOSS) $1,445,567 $(278,130) $2,972,090 $(2,062,845)
WEIGHTED AVERAGE
BASIC & DILUTED
SHARES
OUTSTANDING 62,477,949 62,477,949 62,477,949 62,477,949
BASIC & DILUTED
EARNINGS (LOSS)
PER SHARE $0.02 $-- $0.05 $(0.03)
OTHER COMPREHENSIVE
INCOME:
NET INCOME
(LOSS) $1,445,567 $(278,130) $2,972,090 $(2,062,845)
Foreign currency
translation
adjustment 28,074 280,264 (27,555) 825,050
COMPREHENSIVE
INCOME (LOSS) $1,473,641 $2,134 $2,944,535 $(1,237,795)
HOME SYSTEM GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008
June 30, December 31,
2009 2008
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $7,728,391 $1,609,540
Restricted cash 547,558 1,617,000
Accounts receivable - trade 26,554,914 21,117,962
Accounts receivable-related party 5,637 10,619,911
Other receivables 7,818,751 9,512,666
Inventories 18,411,241 15,613,175
Trade deposits 1,479,892 --
Acquisition deposit 731,500 --
Deferred interest expenses - acquisitions 759,090 1,249,917
Assets held for disposal 3,191,248 --
VAT refundable 1,885,181 1,076,646
TOTAL CURRENT ASSETS 69,113,403 62,416,817
Deferred interest expenses - acquisitions -- 255,230
Acquisition deposit -- 733,500
Land use right -net -- 1,291,852
Property, plant and equipment - net 7,070,364 9,518,826
Intangible assets -net 1,921,257 2,090,947
Goodwill 25,025,292 25,025,292
TOTAL ASSETS $103,130,316 $101,332,464
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans $18,490,293 $11,324,848
Bills payable per bank acceptance
agreement 8,708,118 9,598,621
Accounts payable - trade 14,667,216 21,166,318
Accrued expenses and other payables 6,228,728 6,096,820
Income tax payable 512,994 722,033
Other taxes payable 115,005 424,968
Notes payable - current portion 33,322,052 21,536,763
Due to stockholders - current portion 2,187,769 1,574,573
TOTAL CURRENT LIABILITIES 84,232,175 72,444,944
NON-CURRENT LIABILITIES
Long-term loan 2,928,000 --
Due to stockholders - non-current portion 1,181,507 600,000
Notes payable -- 16,443,421
TOTAL LIABILITIES 88,341,682 89,488,365
STOCKHOLDERS' EQUITY
COMMON STOCK - $0.001 par value;
200,000,000 shares authorized,
62,477,949 shares issued and
outstanding at June 30, 2009 and
December 31, 2008 62,478 62,478
Additional paid-in capital 6,581,717 6,581,717
Note receivable on stock issuance (900,000) (900,000)
Statutory reserve 29,616 29,616
Other comprehensive income 1,824,907 1,852,462
Retained earnings 7,189,916 4,217,826
TOTAL STOCKHOLDERS' EQUITY 14,788,634 11,844,099
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $103,130,316 $101,332,464
HOME SYSTEM GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)
Six Months Ended June 30,
2009 2008
CASH FLOWS USED IN OPERATING ACTIVITIES
Net income (loss) $2,972,090 $(2,062,845)
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation 556,124 249,312
Credit for stock option costs
written back -- (34,009)
Amortization of deferred assets 184,724 --
Change in assets and
liabilities:
(Increase) decrease in assets
Accounts receivable 5,112,785 2,147,068
Other receivables 1,652,732 (63,223)
Prepaid expense (970,770) --
Inventories (2,832,731) 2,706,643
Trade deposits (508,698) 434,734
Deferred interest expenses 746,058 --
VAT refundable (808,535) --
Increase (decrease) in liabilities
Bills payable (1,820,459) 2,292,530
Accounts payable (6,086,138) (5,945,315)
Other payables and accrued expenses (773,188) 549,805
Taxes payable $(519,003) (450,912)
Net cash used in Operating Activities $(3,095,009) (176,212)
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures $(22,092) (58,466)
Net cash used in Investing Activities $(22,092) (58,466)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans 15,586,394 --
Repayment of short-term loans (8,396,848) --
Proceeds from long-term loans 2,928,000 --
Proceeds from notes payable 1,515,628 --
Repayment of notes Payable (4,680,132) --
Restricted cash 1,065,288 (937,512)
Net increase in due to related party 2,858,315 (6,621)
Increase in due from stockholder (3,303,450) --
Increase in due to stockholder $1,636,802 546,300
Net cash from (used in) Financing
Activities $9,209,997 (397,833)
EXCHANGE RATE EFFECT ON CASH 25,955 26,531
NET INCREASE (DECREASE) IN CASH 6,118,851 (605,980)
CASH - BEGINNING OF PERIOD 1,609,540 821,074
CASH - END OF PERIOD $7,728,391 $215,094
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $1,083,568 $27,469
Income taxes $1,244,594 $--
