JINJIANG CITY, China, Nov. 19, 2010 /PRNewswire-Asia/ -- SGOCO Group, Ltd. (OTC Bulletin Board: SGTLF), (the "Company" or "SGOCO"), a national distributor, designer and manufacturer of flat panel displays, including liquid crystal display ("LCD") and LED PC Monitors, TVs and application-specific display solutions in China, today announced its unaudited operating results for the three and nine months ended September 30, 2010.
Third Quarter 2010 vs. Third Quarter 2009
Nine Months 2010 vs. Nine Months 2009
(1) The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections of "About Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures."
Management's Discussion & Analysis of the Results of Operations for the Three Months Ended September 30, 2010
The following analysis compares the results of operations for the third quarter of 2010 with those of the third quarter of 2009.
Revenue
Revenue for the third quarter ended September 30, 2010 was $71.7 million, an increase of 295.0% from $18.2 million in the third quarter of 2009. The Company saw strong sales growth as it expanded its sales base with new customers. Additionally, the improved economic environment and strong growth in exports supported the trend.
Gross Margin
The gross margin as a percent of sales was 13.6% for the three months ended September 30, 2010, compared to 24. 4% for the three months ended September 30, 2009. The gross margin in the third quarter 2009 was exceptionally high due to a firming of average selling prices while at the same time the Company sold inventory that had been acquired at depressed prices during the financial crisis. The costs related to SGOCO Club were $0.3 million for the three months ended September 30, 2010. We did not incur any costs during the three months ended September 30, 2009, as the SGOCO Club model was established in the fourth quarter of 2009.
Net Income and EPS
Net income for the third quarter of 2010 was $7.5 million, compared to $3.5 million recorded for the same period last year. Non-GAAP net income which excludes changes in fair value related to warrant derivative liability was $7.3 million, compared to $3.5 million a year ago. Diluted EPS was $0.79 in the third quarter of 2010, compared to $0.42 in the third quarter of 2009. Non-GAAP diluted EPS, which excludes changes in fair value of warrant derivative liability, was $0.77 in the third quarter of 2010, compared to $0.42 in the third quarter of 2009.
Operating Expenses
Selling, general and administrative expenses amounted to approximately $0.9 million for the three months ended September 30, 2010, an increase of approximately $0.6 million, or 202. 2% compared to $0.3 million for the three months ended September 30, 2009. As the Company's sales increased, selling expenses increased accordingly. The increase in general and administrative expenses was mainly due to: (i) additional costs related to professional fees including audit and legal fees associated with being a public company as it completed its reverse merger in March 2010 and (ii) increase in headcount to meet production growth and the hiring of new officers.
Provision for Income Taxes
Income tax was $1.1 million for the three months ended September 30, 2010 compared to $0.5 million, during the three months ended September 30, 2009. The increase in income taxes resulted from the Company's greater profits.
Cash and Working Capital
As of September 30, 2010, the Company had cash and cash equivalents of $11.8 million and working capital of $24.8 million, compared to $5.8 million and $7.9 million, respectively, as of December 31, 2009. The Current Ratio was 1.29 as of September 30, 2010 compared to 1.17 as of December 31, 2009.
"2010 has been a year of transformation as SGOCO became a public company. We have taken several steps to strengthen our position and take advantage of new business opportunities in the Chinese emerging markets. We are thrilled with the performance and strength of our business. The $71.7 million in revenue for the quarter and over $7.5 million in net income, both represent all-time records for SGOCO," said Mr. Or, CEO and President of SGOCO.
"We sold more in the three months ending September 30, 2010 than we did in the entire first six months of 2010.We have increased the number of SGOCO Club partners to 403 stores as of September 30, 2010. This is a proven record of our capability to capitalize on the growth opportunities in the markets. As we remain committed to our strategy of multiple brands and multiple channels, we expect more exciting developments for the remainder of the year," added Mr. Or.
About SGOCO Group, Ltd.
SGOCO Group, Ltd. is a national distributor, designer and manufacturer of branded flat panel displays, including LCD/LED PC monitors, LCD/LED TVs and application-specific display products in China. SGOCO is dedicated to providing high quality, branded flat panel display solutions at affordable prices for Chinese consumers and emerging markets worldwide.
For more information about SGOCO, please visit http://www.sgocogroup.com.
Safe Harbor and Informational Statement
This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. The Company assumes no obligation to update any of the information contained or referenced in this press release.
About Non-GAAP Financial Measures
We use non-GAAP adjusted net earnings to measure the performance of our business internally by excluding non-cash charges related to warrants and shared-based compensation. We believe that the non-GAAP adjusted financial measure allows us to focus on managing business operating performance because the measure reflects our essential operating activities and provides a consistent method of comparison to historical periods. We believe that providing the non-GAAP measures that we use internally is useful to investors for a number of reasons. The non-GAAP measure provides a consistent basis for investors to understand our financial performance in comparison to historical periods without variation of non-recurring items and non-operating related charges. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment regarding which charges are excluded from the non-GAAP financial measure. However, we compensate for these limitations by providing the relevant disclosure of the items excluded.
The following table provides a non-GAAP financial measure and a reconciliation of that non-GAAP measure to the GAAP net income:
|
SGOCO GROUP, LTD. Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (US dollars in thousands, except per share data and percentages) |
|||||||||||||||||||||||||
|
Three Months Ended September 30, 2010 |
Three Months Ended September 30, 2009 |
||||||||||||||||||||||||
|
GAAP |
Adjustments |
Non-GAAP |
GAAP |
Adjustments |
Non-GAAP |
||||||||||||||||||||
|
Net income |
$ |
7,531 |
(211) |
(a) |
$ |
7,320 |
$ |
3,533 |
- |
(c) |
$ |
3,533 |
|||||||||||||
|
Net margin |
10.5% |
(0.3)% |
(a) |
10.2% |
19.5% |
- |
(c) |
19.5% |
|||||||||||||||||
|
Diluted EPS |
$ |
0.79 |
$ |
(0.02) |
(d) |
$ |
0.77 |
$ |
0.42 |
- |
(c) |
$ |
0.42 |
||||||||||||
|
Nine Months Ended September 30, 2010 |
Nine Months Ended September 30, 2009 |
||||||||||||||||||||||||
|
GAAP |
Adjustments |
Non-GAAP |
GAAP |
Adjustments |
Non-GAAP |
||||||||||||||||||||
|
Net income |
$ |
11,915 |
$ |
814 |
(b) |
$ |
12,729 |
$ |
3,378 |
- |
(c) |
$ |
3,378 |
||||||||||||
|
Net margin |
8.9% |
0.6% |
(b) |
9.5% |
10.2% |
- |
(c) |
10.2% |
|||||||||||||||||
|
Diluted EPS |
$ |
1.28 |
$ |
0.09 |
(d) |
$ |
1.37 |
$ |
0.40 |
- |
(c) |
$ |
0.40 |
||||||||||||
|
A) Adjustment to exclude changes in fair value related to warrant derivative liability of $(211,000) from other B) Adjustment to exclude changes in fair value related to warrant derivative liability of $814,000 from other C) Changes in fair value related to warrant derivative liability only incurred from the first quarter of 2010. No such D) Non-GAAP diluted EPS is computed by dividing Non-GAAP net income attributable to SGOCO Technology, Ltd. |
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For investor and media inquiries, please contact:
|
Company Contact |
Investor Relations Representative |
|
|
China |
United States |
|
|
SGOCO Group, Ltd. |
The Equity Group, Inc. |
|
|
Peggy Yuan |
Lena Cati |
|
|
Tel: + 86-10-5879-7435 ext 808 |
Tel: 212 836-9611 / lcati@equityny.com |
|
|
Email: peggy@sgoco.com |
Linda Latman |
|
|
Tel: 212 836-9609 / llatman@equityny.com |
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|
SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS |
|||||||||
|
September 30, |
December 31, |
||||||||
|
2010 |
2009 |
||||||||
|
(Unaudited) |
|||||||||
|
ASSETS |
|||||||||
|
CURRENT ASSETS |
|||||||||
|
Cash |
$ |
11,827,788 |
$ |
5,808,013 |
|||||
|
Restricted cash |
6,325,444 |
5,596,699 |
|||||||
|
Accounts receivable, trade |
48,717,301 |
18,641,548 |
|||||||
|
Accounts receivable - related parties |
251,299 |
224,407 |
|||||||
|
Other receivables |
216,041 |
121,226 |
|||||||
|
Other receivables - related parties |
656,154 |
- |
|||||||
|
Inventories |
25,375,216 |
4,011,505 |
|||||||
|
Advances to suppliers |
17,246,462 |
11,950,074 |
|||||||
|
Advances to suppliers - related parties |
27,315 |
8,954,051 |
|||||||
|
Other current assets |
374,080 |
20,746 |
|||||||
|
Total current assets |
111,017,100 |
55,328,269 |
|||||||
|
PLANT AND EQUIPMENT, NET |
17,228,019 |
15,729,350 |
|||||||
|
OTHER ASSETS |
|||||||||
|
Intangible assets, net |
8,553,629 |
8,412,366 |
|||||||
|
Other non-current assets |
- |
2,693 |
|||||||
|
Total other assets |
8,553,629 |
8,415,059 |
|||||||
|
Total assets |
$ |
136,798,748 |
$ |
79,472,678 |
|||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||
|
CURRENT LIABILITIES |
|||||||||
|
Accounts payable, trade |
$ |
36,074,666 |
$ |
3,490,937 |
|||||
|
Accrued liabilities |
126,106 |
74,147 |
|||||||
|
Bank overdraft |
1,476,136 |
717,562 |
|||||||
|
Notes payable |
21,703,423 |
18,709,038 |
|||||||
|
Short-term loan |
22,177,905 |
19,230,756 |
|||||||
|
Other payables |
1,024,567 |
382,978 |
|||||||
|
Other payables - related parties |
- |
198,875 |
|||||||
|
Customer deposits |
2,054,556 |
457,761 |
|||||||
|
Customer deposits - related parties |
- |
335,056 |
|||||||
|
Taxes payable |
1,598,324 |
3,872,916 |
|||||||
|
Total current liabilities |
86,235,683 |
47,470,026 |
|||||||
|
OTHER LIABILITIES |
|||||||||
|
Warrant derivative liability |
1,908,698 |
- |
|||||||
|
Put option derivative liability |
2,000,000 |
- |
|||||||
|
Total other liabilities |
3,908,698 |
- |
|||||||
|
Total liabilities |
90,144,381 |
47,470,026 |
|||||||
|
COMMITMENT AND CONTINGENCIES |
|||||||||
|
SHAREHOLDERS' EQUITY |
|||||||||
|
Preferred stock, $0.001 par value, 1,000,000 shares authorized,nil issued and |
16,095 |
14,300 |
|||||||
|
Paid-in-capital |
19,037,683 |
17,263,916 |
|||||||
|
Statutory reserves |
2,726,310 |
1,286,942 |
|||||||
|
Retained earnings |
21,870,055 |
11,394,086 |
|||||||
|
Accumulated other comprehensive income |
3,004,224 |
2,043,408 |
|||||||
|
Total shareholders' equity |
46,654,367 |
32,002,652 |
|||||||
|
Total liabilities and shareholders' equity |
$ |
136,798,748 |
$ |
79,472,678 |
|||||
|
SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (UNAUDITED) |
|||||||||||||||||
|
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||
|
2010 |
2009 |
2010 |
2009 |
||||||||||||||
|
REVENUES: |
|||||||||||||||||
|
Revenues |
$ |
55,901,224 |
$ |
12,922,389 |
$ |
97,032,397 |
$ |
25,974,808 |
|||||||||
|
Revenues - related parties |
- |
2,540,575 |
12,549,795 |
4,080,501 |
|||||||||||||
|
Other operating income |
15,845,849 |
2,700,762 |
24,505,507 |
3,073,125 |
|||||||||||||
|
Total revenues |
71,747,073 |
18,163,726 |
134,087,699 |
33,128,434 |
|||||||||||||
|
COST OF GOODS SOLD: |
|||||||||||||||||
|
Cost of goods sold |
47,671,144 |
9,842,811 |
82,316,858 |
22,951,362 |
|||||||||||||
|
Cost of goods sold - related parties |
- |
2,061,702 |
10,230,151 |
3,003,741 |
|||||||||||||
|
Other operating expenses |
14,306,692 |
1,821,043 |
22,228,435 |
2,143,474 |
|||||||||||||
|
Total cost of goods sold |
61,977,836 |
13,725,556 |
114,775,444 |
28,098,577 |
|||||||||||||
|
GROSS PROFIT |
9,769,237 |
4,438,170 |
19,312,255 |
5,029,857 |
|||||||||||||
|
OPERATING EXPENSES: |
|||||||||||||||||
|
Selling expenses |
182,922 |
38,810 |
366,347 |
76,677 |
|||||||||||||
|
General and administrative expenses |
679,907 |
246,739 |
3,034,763 |
515,049 |
|||||||||||||
|
Total operating expenses |
862,829 |
285,549 |
3,401,110 |
591,726 |
|||||||||||||
|
INCOME FROM OPERATIONS |
8,906,408 |
4,152,621 |
15,911,145 |
4,438,131 |
|||||||||||||
|
OTHER INCOME (EXPENSES): |
|||||||||||||||||
|
Interest income |
20,422 |
2,022 |
63,184 |
3,618 |
|||||||||||||
|
Interest expense |
(267,799) |
(218,490) |
(660,319) |
(576,378) |
|||||||||||||
|
Other income (expense), net |
(274,813) |
109,585 |
(563,901) |
6,037 |
|||||||||||||
|
Change in fair value of warrant derivative liability |
211,080 |
- |
(813,748) |
- |
|||||||||||||
|
Total other income (expenses), net |
(311,110) |
(106,883) |
(1,974,784) |
(566,723) |
|||||||||||||
|
INCOME BEFORE PROVISION FOR INCOME TAXES |
8,595,298 |
4,045,738 |
13,936,361 |
3,871,408 |
|||||||||||||
|
PROVISION FOR INCOME TAXES |
1,064,181 |
512,501 |
2,021,024 |
493,170 |
|||||||||||||
|
NET INCOME |
7,531,117 |
3,533,237 |
11,915,337 |
3,378,238 |
|||||||||||||
|
OTHER COMPREHENSIVE INCOME: |
|||||||||||||||||
|
Foreign currency translation adjustment |
793,940 |
248,776 |
960,816 |
(22,765) |
|||||||||||||
|
COMPREHENSIVE INCOME |
$ |
8,325,057 |
$ |
3,782,013 |
$ |
12,876,153 |
$ |
3,355,473 |
|||||||||
|
EARNINGS PER SHARE: |
|||||||||||||||||
|
Basic |
$ |
0.79 |
$ |
0.42 |
$ |
1.29 |
$ |
0.40 |
|||||||||
|
Diluted |
$ |
0.79 |
$ |
0.42 |
$ |
1.28 |
$ |
0.40 |
|||||||||
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES: |
|||||||||||||||||
|
Basic |
9,527,932 |
8,500,000 |
9,260,594 |
8,500,000 |
|||||||||||||
|
Diluted |
9,527,932 |
8,500,000 |
9,278,054 |
8,500,000 |
|||||||||||||
|
SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY |
|||||||||||||||||||||||||||||
|
Accumulated |
|||||||||||||||||||||||||||||
|
Retained Earnings |
Other |
||||||||||||||||||||||||||||
|
Ordinary Shares |
Paid-in |
Statutory |
Comprehensive |
||||||||||||||||||||||||||
|
Shares |
Par Value |
Capital |
Reserves |
Unrestricted |
Income |
Total |
|||||||||||||||||||||||
|
BALANCE, December 31, 2008 |
14,300,000 |
$ |
14,300 |
$ |
14,183,916 |
$ |
571,035 |
$ |
4,950,920 |
$ |
2,060,272 |
$ |
21,780,443 |
||||||||||||||||
|
Shareholder contribution |
2,090,000 |
2,090,000 |
|||||||||||||||||||||||||||
|
Net income |
3,378,238 |
3,378,238 |
|||||||||||||||||||||||||||
|
Adjustment for statutory reserve |
345,219 |
(345,219) |
- |
||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
(22,765) |
(22,765) |
|||||||||||||||||||||||||||
|
BALANCE, September 30, 2009 (Unaudited) |
14,300,000 |
14,300 |
16,273,916 |
916,254 |
7,983,939 |
2,037,507 |
27,225,916 |
||||||||||||||||||||||
|
Shareholder contribution |
990,000 |
990,000 |
|||||||||||||||||||||||||||
|
Net income |
3,780,835 |
3,780,835 |
|||||||||||||||||||||||||||
|
Adjustment for statutory reserve |
370,688 |
(370,688) |
- |
||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
5,901 |
5,901 |
|||||||||||||||||||||||||||
|
BALANCE, December 31, 2009 |
14,300,000 |
14,300 |
17,263,916 |
1,286,942 |
11,394,086 |
2,043,408 |
32,002,652 |
||||||||||||||||||||||
|
Shares issued for recapitalization |
1,027,933 |
1,028 |
4,501,937 |
4,502,965 |
|||||||||||||||||||||||||
|
Shares placed in escrow |
766,823 |
767 |
767 |
||||||||||||||||||||||||||
|
Payments of financing costs |
- |
||||||||||||||||||||||||||||
|
Shareholder contribution |
366,780 |
366,780 |
|||||||||||||||||||||||||||
|
Reclassification of warrants to derivative liabilities |
(1,094,950) |
(1,094,950) |
|||||||||||||||||||||||||||
|
Reclassification of put options to derivative liabilities |
(2,000,000) |
(2,000,000) |
|||||||||||||||||||||||||||
|
Net income |
11,915,337 |
11,915,337 |
|||||||||||||||||||||||||||
|
Adjustment for statutory reserve |
1,439,368 |
(1,439,368) |
- |
||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
960,816 |
960,816 |
|||||||||||||||||||||||||||
|
BALANCE, September 30, 2010 (Unaudited) |
16,094,756 |
$ |
16,095 |
$ |
19,037,683 |
$ |
2,726,310 |
$ |
21,870,055 |
$ |
3,004,224 |
$ |
46,654,367 |
||||||||||||||||
|
SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
|||||||||
|
Nine months ended September 30, |
|||||||||
|
2010 |
2009 |
||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||||
|
Net income |
$ |
11,915,337 |
$ |
3,378,238 |
|||||
|
Adjustments to reconcile net income to cash provided by (used in) operating activities: |
|||||||||
|
Depreciation and amortization |
721,805 |
448,129 |
|||||||
|
Change in fair value of warrant derivative liability |
813,748 |
- |
|||||||
|
Change in fair value of put option |
- |
- |
|||||||
|
Change in operating assets and liabilities: |
|||||||||
|
Accounts receivable, trade |
(29,182,600) |
(21,833,913) |
|||||||
|
Accounts receivable - related parties |
(21,915) |
2,145,577 |
|||||||
|
Other receivables |
(105,946) |
(975,496) |
|||||||
|
Inventories |
(20,912,054) |
(1,196,871) |
|||||||
|
Advances to suppliers |
(4,964,267) |
(4,862,812) |
|||||||
|
Advances to suppliers - related parties |
8,951,625 |
(39,341) |
|||||||
|
Other current assets |
(262,349) |
34,300 |
|||||||
|
Change in operating liabilities |
|||||||||
|
Accounts payable, trade |
31,947,666 |
425,168 |
|||||||
|
Accrued liabilities |
(84,554) |
16,343 |
|||||||
|
Notes payables |
2,566,425 |
5,124,510 |
|||||||
|
Other payables |
622,750 |
(3,596,085) |
|||||||
|
Other payables - related parties |
(900,754) |
10,990,431 |
|||||||
|
Customer deposits |
1,559,863 |
1,142,742 |
|||||||
|
Customer deposits - related parties |
(335,970) |
(29,680) |
|||||||
|
Taxes payable |
(2,312,911) |
964,889 |
|||||||
|
Net cash provided by (used in) operating activities |
15,899 |
(7,863,871) |
|||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||
|
Payments on equipments and construction-in-progress |
(2,577,280) |
(3,032,202) |
|||||||
|
Purchase of intangible assets |
(6,384) |
(4,897,543) |
|||||||
|
Cash received from legal acquirer |
5,913 |
- |
|||||||
|
Net cash used in investing activities |
(2,577,751) |
(7,929,745) |
|||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||||
|
Increase in restricted cash |
(603,623) |
(2,270,419) |
|||||||
|
Bank overdraft |
730,979 |
1,268,282 |
|||||||
|
Proceeds from government |
735,500 |
2,492,030 |
|||||||
|
Proceeds from short-term loan |
23,376,595 |
12,313,560 |
|||||||
|
Repayments on short-term loan |
(20,867,069) |
- |
|||||||
|
Shareholder contribution |
366,780 |
2,090,000 |
|||||||
|
Proceeds from recapitalization |
5,388,083 |
- |
|||||||
|
Repayments on shareholder promissory notes |
(100,000) |
- |
|||||||
|
Payments of financing costs |
(666,468) |
- |
|||||||
|
Net cash provided by financing activities |
8,360,777 |
15,893,453 |
|||||||
|
EFFECT OF EXCHANGE RATE ON CASH |
220,850 |
(23,742) |
|||||||
|
INCREASE IN CASH |
6,019,775 |
76,095 |
|||||||
|
CASH, beginning of period |
5,808,013 |
352,568 |
|||||||
|
CASH, end of period |
$ |
11,827,788 |
$ |
428,663 |
|||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|||||||||
|
Interest expenses paid (net of amount capitalized) |
$ |
660,319 |
$ |
576,378 |
|||||
|
Income taxes paid |
$ |
1,183,405 |
$ |
- |
|||||
|
Non-cash investing activities |
|||||||||
|
Construction-in-progress transferred to property plant and equipment |
$ |
2,697,347 |
$ |
- |
|||||
