omniture

SOKO Fitness & Spa Group Reports Third Quarter Fiscal 2011 Financial Results

2011-04-14 18:04 1569

Net Income Increases 11% Year-over-year to $3.0 Million, or $0.14 EPS, on Record Quarterly Revenue of $10.3 Million; Cash Flow From Operating Activities Increases 95% to $20.0 Million for the First Nine Months of Fiscal 2011


HARBIN, China, April 14, 2011 /PRNewswire-Asia/ -- SOKO Fitness & Spa Group, Inc. (OTC BB: SOKF) ("SOKO"), an operator of fitness centers and beauty salons and spas in China, today announced its financial results for the third quarter and first nine months of fiscal 2011, ended February 28, 2011.

Third Quarter Financial Highlights:

  • Revenue totaled $10.3 million, an increase of 27% over $8.1 in the third quarter of fiscal 2010.
  • Gross profit increased 21% to $7.0 million, compared with $5.8 million, in the same period a year ago. Gross margin was 68.2% for the third quarter of fiscal 2011, compared with 71.6 % for the third quarter of fiscal 2010, and 67.6% for the second quarter of fiscal 2011.
  • Net income attributable to SOKO improved 11% year-over-year to $3.0 million, or $0.14 per diluted share based on diluted shares outstanding of 22.0 million shares, compared with $2.7 million, or $0.15 per diluted share based on diluted shares outstanding of 18.2 million shares in the same period a year ago.
  • SOKO increased total fitness club members 27% year-over-year and 0.3% sequentially to approximately 23,000 and beauty salon and spa clients 28% year-over-year and 7% sequentially to approximately 27,100.
  • Cash and cash equivalents was $15.7 million as of February 28, 2011, an increase of $0.7 million over November 30, 2010. The sequential increase in cash and cash equivalents was related to increased operating cash flow.
  • Record deferred revenue of $18.9 million as of February 28, 2011.
  • SOKO has affirmed its expected revenue range of $39-$42 million for fiscal 2011, ending May 31, 2011. This represents an increase of approximately 30–40% compared with fiscal 2010.

Third Quarter and Recent Business Highlights:

  • Added eight new facilities in the third quarter of fiscal 2011 and 12 facilities year-to-date. Expansion remains on-track to add up to 16 new facilities in fiscal 2011 through new construction, acquisition or operation under management agreements.
  • Entered new strategic markets in Eastern and Central China through the opening of two beauty salons and two fitness centers in Hangzhou, Zhejiang Province, as well as a yoga center in Zhengzhou, Henan Province.
  • Expanded operations in Northeastern China through the opening of two beauty salons and one fitness center in Harbin and Shenyang

"This was another record quarter for SOKO as we continued to execute on our business plan, growing our top and bottom-line, expanding our geographic footprint and generating increased cash from operations," said Tong Liu, Chief Executive Officer of SOKO. "We delivered robust growth across our fitness and aesthetic businesses in each of our core geographic markets and achieved meaningful growth in our member and client base, with total spa and salon clients at the end of the third quarter exceeding our goal for the full year, supported by growth in both our newly-opened and more mature facilities. While actively signing new members and clients, we have been able to maintain high retention rates, which contributed to a record backlog of $18.9 million at the end of the third quarter."

"Our continued geographic expansion and our emerging position as a national brand in China's growing market for luxury fitness and aesthetic services remains a top focus of our company, and we are making excellent progress against these goals. With the addition of eight new facilities to our portfolio in the third quarter, we have further solidified our presence in our core Harbin and Shenyang markets in Northeastern China, as well as expanded into strategic markets in Eastern and Central China.  Through our ongoing expansion efforts, combined with the maturation of our existing facilities, we believe we can capitalize on the continued growth of China's middle class and desire of our target customers and clients to improve their standard of living.  Through this, we believe we will be able to continue driving revenues, earnings and shareholder value," Mr. Liu concluded.

SOKO currently operates 32 facilities in China, including 17 beauty salons and spas, one non-surgical medical beauty center, 13 fitness centers and yoga studios and one beauty school. 21 of these facilities are wholly owned, six are majority owned, and five are minority owned, and operated by SOKO under a management agreement. Of these facilities, 16 were in their first year of operation, four were in their second year, four were in their third year, and eight had reached maturity, at more than three years old.

Third Fiscal Quarter Financial Summary

Total revenue for the three months ended February 28, 2011 was $10.3 million, an increase of 27%, compared with revenue of $8.1 million for the three months ended February 28, 2010. The increase in revenue was primarily attributable to increased sales from existing members and clients, sales of add-on services to members and clients and SOKO's continued efforts to add members and clients at both new and existing facilities.

During the three months ended February 28, 2011, spa and beauty services and products, including beauty school tuition, accounted for 83.0% of revenue, with fitness centers accounting for 17.0% of revenue for the quarter. SOKO expects its revenue mix to remain relatively stable in future periods.

Gross profit for the three months ended February 28, 2011 was $7.0 million, compared with $5.8 million for the three months ended February 28, 2010. The increase in gross profit was mainly attributable to an increase in the number of SOKO-operated facilities, growth in the number of members and clients at SOKO's existing facilities and the introduction of value added products and services. Overall gross profit margin was 68.2% for the three months ended February 28, 2011, compared with 71.6% in the year-ago period. The year-over-year decline in gross margin was primarily related to an increase in overall cost of sales related to pre-opening expenses incurred during the quarter.

Selling, general and administrative expenses for the three months ended February 28, 2011 was $4.0 million, compared with $3.1 million for the three months ended February 28, 2010. The increase in SG&A expense was mainly attributable to the increase in the expense associated with the opening of new facilities. Since the third quarter of fiscal 2010, SOKO has added a total of 15 facilities to its portfolio of owned and operated fitness centers, spas and salons, including eight during the third quarter of fiscal 2011. SOKO expects that its SG&A will continue to fluctuate from quarter to quarter, based on the level of facility opening and construction activity.

Net income attributable to SOKO Fitness & Spa Group, Inc. for three months ended February 28, 2011 increased 11% year-over-year to $3.0 million, compared with $2.7 million in the third quarter of fiscal 2010. Diluted earnings per share was $0.14, based on 21.7 million weighted average diluted shares outstanding, compared with $0.15 per diluted share, based on 18.2 million weighted average diluted shares outstanding, for the same period a year ago. The increase in net income for the third quarter of fiscal 2011 was mainly attributable to the aforementioned 27% revenue growth, partially offset by the increases in amortization of leasehold improvement, rental expenses for new facilities and expenses relating to opening new facilities.

As of February 28, 2011, SOKO had cash and cash equivalents of $15.7 million compared with $18.1 million on May 31, 2010 and $15.0 million on November 30, 2010. The sequential-quarter increase in cash and cash equivalents was related to cash flow from operations.

Fiscal 2011 Guidance:

SOKO is affirming its gross revenue guidance for fiscal year 2011, ending May 31, 2011. Revenue for the fiscal year is expected to range from $39 million to $42 million, which if achieved, would represent year-over-year growth of approximately 30-40%.  SOKO expects its revenue growth to be driven by a combination of new facility openings, an increase in the number of members and clients at its existing fitness and spa facilities and an increase in average revenue per customer.

During the fourth quarter of fiscal 2011, SOKO plans to add four new facilities to its portfolio through a combination of new construction, majority acquisition and the establishment of management agreements at minority-owned facilities, bringing the total number of new facilities added in fiscal 2011 to 16.  SOKO expects that capital expenditures associated with these facilities will be fully funded from cash on hand and operating cash flow.

Mr. Liu added, "We believe we have built a strong foundation upon which to continue building our business throughout China.  Consistent with our past practice, we plan to continue our expansion focus on strategically targeted, economically stable tier-two markets in which we can build market share and quickly establish brand equity. The execution of our growth strategy is proceeding according to plan, with 12 new facilities opened during the first nine months of fiscal 2011, and another 4 under construction or engaged in pre-opening activities. In the fourth quarter and into our fiscal 2012, we will continue to target new strategic markets and identify ways to extend our demographic and geographic footprint, increase our customer base, capture market share and continue to grow our business."

Conference Call

SOKO will host a conference call for interested investors and analysts to discuss its financial results for the period on Thursday, April 14, 2011, at 8:00 a.m. Eastern time. To participate in the conference call, please dial 1-877-941-8416 from the U.S. and Canada, or 1-480-629-9808 for international callers.

An audio replay will also be available approximately one hour after the conclusion of the call and will be made available through April 28, 2011. The audio replay can be accessed by dialing 1-800-406-7325 from the U.S or Canada, or 1-303-590-3030 internationally, and entering access ID Number 4432095.

About SOKO Fitness & Spa Group, Inc.

SOKO Fitness & Spa Group, Inc., an OTCBB listed company (SOKF), is an operator of fitness centers and beauty salons and spas in key cities in China. SOKO provides programs, services, and products combined with exercise, education and nutrition to help their members lead a healthy life and achieve their fitness goals. For further information, please go to http://www.sokofitness.com.

To be added to SOKO's email distribution for future news releases, please send your request to soko@tpg-ir.com.

Cautionary Note Regarding Forward Looking Statements

This press release and the statements of representatives of SOKO Fitness & Spa Group, Inc. (the "Company") related thereto contain, or may contain, statements that are not historical facts and are therefore "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company's plans, objectives, projections, beliefs, expectations and intentions and other statements identified by words such as "guidance," "projects," "may," "could," "would," "should," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. Actual results, including, without limitation, future financial results and results regarding the Company's expansion strategies, service offerings, client, membership and customer figures, proposed new center openings and prospects and strategies for growth, may differ significantly from those set forth in the forward-looking statements.  These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control).  The Company does not undertake any obligation to update any forward- looking statement, except as required under applicable law.

Contacts:

 

 

 

The Piacente Group, Inc.

 

 

 

Investor Relations

 

 

 

Brandi Floberg or Lee Roth

 

 

 

(212) 481-2050

 

 

 

soko@tpg-ir.com

 

 

 

 

 

 

SOKO Fitness & Spa Group, Inc.

 

SOKO Fitness & Spa Group, Inc.

 

 

Shawn Qu

 

Judy Jiang

 

 

Tel: (908) 208-8681

 

Tel: +86(451) 8770 2280

 

 

Email: shawnqu@sokofitness.com                                                                              

 

Email: judyjiang@sokofitness.com

 

 

 

 



SOKO FITNESS & SPA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

 

 

 

 

February 28, 2011

 

 

May 31, 2010

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash  

 

 

$

 

15,673,158

 

 

$

 

18,104,218

 

 

Accounts receivables, net

 

 

 

184,942

 

 

 

911,523

 

 

Inventories, net

 

 

 

1,307,723

 

 

 

1,099,208

 

 

Advance to suppliers

 

 

 

8,924,621

 

 

 

6,302,976

 

 

Other receivables

 

 

 

515,806

 

 

 

437,196

 

 

Loan to others

 

 

 

151,974

 

 

 

146,270

 

 

Refundable investment deposits

 

 

 

3,191,917

 

 

 

-

 

 

Prepaid expense

 

 

 

203,155

 

 

 

127,365

 

 

Total Current Assets

 

 

 

30,153,296

 

 

 

27,128,756

 

 

 

 

 

 

 

 

 

 

Building facilities and equipment, net

 

 

 

43,880,300

 

 

 

24,116,400

 

 

Advanced payment for construction in progress  

 

 

 

1,948,524

 

 

 

-

 

 

Security deposits

 

 

 

462,128

 

 

 

75,412

 

 

Deferred rent

 

 

 

642,945

 

 

 

897,032

 

 

Goodwill

 

 

 

4,341,300

 

 

 

4,178,365

 

 

Intangible assets, net

 

 

 

1,330,372

 

 

 

1,739,107

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

$

 

82,758,865

 

 

$

 

58,135,072

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Short term loans

 

 

$

 

3,804,226

 

 

$

 

2,196,869

 

 

Accounts payable, accrued expenses and other payables

 

 

 

1,963,180

 

 

 

1,707,381

 

 

Deferred revenue

 

 

 

18,856,864

 

 

 

9,344,088

 

 

Taxes payable

 

 

 

138,260

 

 

 

144,598

 

 

 

 

 

 

 

 

 

 

Long-term Liabilities

 

 

 

 

 

 

 

 

Long-term loan

 

 

 

1,521,690

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

$

 

26,284,220

 

 

$

 

13,392,936

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value; 10,000,000

 

 

 

 

 

 

-

 

 

Common stock, $0.001 par value; 500,000,000 shares
authorized, 20,459,677 and 20,213,889 shares issued and
outstanding at February 28, 2011 and May 31, 2010,
respectively.

 

 

 

20,460

 

 

 

20,214

 

 

Additional paid in capital

 

 

 

13,046,555

 

 

 

12,604,619

 

 

Warrants

 

 

 

639,253

 

 

 

639,253

 

 

Accumulated other comprehensive income

 

 

 

3,772,682

 

 

 

1,913,924

 

 

Retained earnings

 

 

 

38,969,695

 

 

 

29,655,804

 

 

Total SOKO Fitness & Spa Group, Inc. Shareholders' Equity

 

 

 

56,448,645

 

 

 

44,833,814

 

 

Non-controlling interest

 

 

 

26,000

 

 

 

(91,678)

 

 

Total Equity

 

 

 

56,474,645

 

 

 

44,742,136

 

 

Total Liabilities and Equity

 

 

$

 

82,758,865

 

 

$

 

58,135,072

 

 

 

 

 

 

 

 

 

 

 



SOKO FITNESS & SPA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN US DOLLARS)

(UNAUDITED)

 

 

 

 

For the Three Months Ended
February 28,

 

 

For the Nine Months Ended
February 28,

 

 

 

 

2011

 

 

2010

 

 

2011

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

$

 

10,282,781

 

 

$

 

8,087,602

 

 

$

 

29,245,410

 

 

$

 

21,931,285

 

 

Cost of Sales

 

 

 

(3,264,885)

 

 

 

(2,293,963)

 

 

 

(9,547,417)

 

 

 

(6,745,707)

 

 

Gross profit

 

 

 

7,017,896

 

 

 

5,793,639

 

 

 

19,697,993

 

 

 

15,185,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative Expenses:

 

 

 

4,041,561

 

 

 

3,107,666

 

 

 

10,548,698

 

 

 

7,007,425

 

 

Operating Income

 

 

 

2,976,335

 

 

 

2,685,973

 

 

 

9,149,295

 

 

 

8,178,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income(expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank charges

 

 

 

(5,186)

 

 

 

(1,807)

 

 

 

(16,194)

 

 

 

(11,789)

 

 

Interest income

 

 

 

5,514

 

 

 

1,347

 

 

 

9,419

 

 

 

4,061

 

 

Interest expense

 

 

 

(72,220)

 

 

 

83

 

 

 

(145,922)

 

 

 

(33,560)

 

 

Foreign exchange gain/loss

 

 

 

(12,020)

 

 

 

(22)

 

 

 

(33,100)

 

 

 

-

 

 

Other income

 

 

 

70,508

 

 

 

41,066

 

 

 

479,243

 

 

 

79,755

 

 

Total other income(expense)

 

 

 

(13,404)

 

 

 

40,667

 

 

 

293,446

 

 

 

38,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax

 

 

 

2,962,931

 

 

 

2,726,640

 

 

 

9,442,741

 

 

 

8,216,620

 

 

Provision for Income Tax

 

 

 

13,175

 

 

 

14,337

 

 

 

31,832

 

 

 

62,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net  income

 

 

 

2,949,756

 

 

 

2,712,303

 

 

 

9,410,909

 

 

 

8,154,379

 

 

Less: net (loss) income attributable to non-controlling interest

 

 

 

(78,498)

 

 

 

6,234

 

 

 

97,018

 

 

 

(155,916)

 

 

Net Income Attributable to SOKO Fitness & Spa Group, Inc.

 

 

 

3,028,254

 

 

 

2,706,069

 

 

 

9,313,891

 

 

 

8,310,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to SOKO Fitness & Spa Group, Inc

 

 

 

778,951

 

 

 

3,073

 

 

 

1,858,758

 

 

 

7,767

 

 

Attributable to non-controlling interest

 

 

 

(1,456)

 

 

 

(28)

 

 

 

(1,708)

 

 

 

(91)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to SOKO Fitness & Spa Group, Inc

 

 

$

 

3,807,205

 

 

$

 

2,709,142

 

 

$

 

11,172,651

 

 

$

 

8,318,062

 

 

Attributable to non-controlling interest

 

 

$

 

(79,954)

 

 

$

 

6,206

 

 

$

 

95,310

 

 

$

 

(156,007)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

 

0.15

 

 

$

 

0.16

 

 

$

 

0.46

 

 

$

 

0.49

 

 

Diluted

 

 

$

 

0.14

 

 

$

 

0.15

 

 

$

 

0.43

 

 

$

 

0.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

Basic

 

 

 

20,459,677

 

 

 

17,000,000

 

 

 

20,330,815

 

 

 

17,000,000

 

 

Diluted

 

 

 

21,963,081

 

 

 

18,168,443

 

 

 

21,834,220

 

 

 

18,467,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



SOKO FITNESS & SPA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

 

 

 

 

For the Nine Months Ended February 28,

 

 

 

 

2011

 

 

2010

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net Income

 

 

$

 

9,410,909

 

 

$

 

8,154,379

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash used in operating activities

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

192,181

 

 

 

22,979

 

 

Depreciation

 

 

 

2,416,593

 

 

 

1,767,079

 

 

Amortization

 

 

 

607,918

 

 

 

197,860

 

 

Changes in current assets and liabilities

 

 

 

 

 

 

 

 

Restricted cash

 

 

 

-

 

 

 

7,232

 

 

Accounts receivable, net

 

 

 

726,581

 

 

 

(729,532)

 

 

Inventories, net

 

 

 

(208,515)

 

 

 

(86,004)

 

 

Advance to suppliers

 

 

 

(2,621,645)

 

 

 

(1,903,830)

 

 

Other receivables

 

 

 

(84,314)

 

 

 

(453,958)

 

 

Prepaid expense

 

 

 

(75,790)

 

 

 

90,856

 

 

Security deposits

 

 

 

(386,716)

 

 

 

(207,666)

 

 

Deferred rent

 

 

 

254,087

 

 

 

(236,003)

 

 

Accounts payable, accrued expenses and other payables

 

 

 

255,799

 

 

 

403,813

 

 

Deferred revenue

 

 

 

9,512,776

 

 

 

3,443,182

 

 

Taxes payable

 

 

 

(6,338)

 

 

 

(219,259)

 

 

Net cash provided by operating activities

 

 

 

19,993,526

 

 

 

10,251,128

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of software

 

 

 

(140,367)

 

 

 

-

 

 

Investment payment  

 

 

 

-

 

 

 

(1,486,647)

 

 

Refundable investment deposits

 

 

 

(3,191,917)

 

 

 

-

 

 

Purchase of building facilities and equipment

 

 

 

 

 

 

 

 

and advanced payment for construction in progress

 

 

 

(22,832,929)

 

 

 

(6,048,978)

 

 

Cash acquired from acquisition

 

 

 

-

 

 

 

208,116

 

 

Net cash used in investing activities

 

 

 

(26,165,213)

 

 

 

(7,327,509)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Capital contribution from minority shareholder

 

 

 

21,946

 

 

 

-

 

 

Proceeds from warrants exercise

 

 

 

250,000

 

 

 

-

 

 

Proceeds from short term loans

 

 

 

3,732,374

 

 

 

3,660,609

 

 

Proceeds from long-term loans

 

 

 

1,492,949

 

 

 

-

 

 

Repayment of short term loans

 

 

 

(2,239,424)

 

 

 

(3,660,609)

 

 

Net cash provided by financing activities

 

 

 

3,257,845

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

482,782

 

 

 

2,233

 

 

Net (decrease) increase in cash

 

 

 

(2,431,060)

 

 

 

2,925,852

 

 

 

 

 

 

 

 

 

 

Cash - beginning balance

 

 

 

18,104,218

 

 

 

1,907,640

 

 

 

 

 

 

 

 

 

 

Cash - ending balance

 

 

$

 

15,673,158

 

 

$

 

4,833,492

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

   Interest paid

 

 

$

 

145,922

 

 

$

 

31,564

 

 

   Income taxes paid

 

 

$

 

38,387

 

 

$

 

22,753

 

 

 

 

 

 

 

 

 

 

 




Source: SOKO Fitness & Spa Group, Inc.
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