XIAMEN, China, April 20 /PRNewswire-Asia/ --
-- Full Year 2009 Net Sales Increase 24% to $64.3 Million; Fourth Quarter
Net Sales Rise 57% to $18.5 Million
-- Full Year 2009 Gross Profit Rises 25% to $23.3 Million
-- Full Year 2009 Income from Operations Up 10% to $13.6 Million
-- Full Year 2009 Net Income Increases 14% to $10.4 Million (1); Adjusted
Diluted Earnings Per Share Reach $0.65 (1)
VLOV, Inc. (OTC Bulletin Board: VLOV) ("VLOV" or the "Company"), the China-based designer of VLOV brand men's apparel, today announced record financial results for the fourth quarter and full year ended December 31, 2009.
Fourth Quarter 2009
For the fourth quarter of 2009, net sales increased 56.7% to $18.5 million, compared to $11.8 million in the fourth quarter of 2008. Fourth quarter gross profit improved to $6.8 million versus $4.1 million in the comparable period of 2008, while gross margin increased to 36.5% compared to 35.1% in the fourth quarter of 2008.
Operating expenses were $5.2 million, or 28.2% of sales compared to $1.2 million, or 10.1% of sales in the 2008 period. The year-over-year increase is primarily attributable to costs associated with the Company's financing transactions in the fourth quarter of 2009. Income from operations in the fourth quarter of 2009 was $1.5 million compared to $2.9 million in the prior year period.
Net loss attributable to common shareholders was $2.4 million compared to net income of $2.2 million in the fourth quarter of 2008, while diluted net loss per share came in at $0.14 versus diluted earnings per share of $0.15 in the prior year period. Fourth quarter net income was $1.6 million, and adjusted diluted earnings per share (non-GAAP) came in at $0.10 on an additional 1.8 million shares.(1). The increase in share count from 14.6 million in the 2008 period to 16.4 million in the 2009 period reflects the issuance of preferred and common shares and common stock purchase warrants in the fourth quarter of 2009.
"We are pleased to report a strong fourth quarter and a very successful 2009," said Mr. Qingqing Wu, Chairman and CEO of VLOV. "The year was highlighted by record financial results, as well as a number of accomplishments from both a strategic and operating perspective. We delivered double-digit revenue growth, solid gross profit and operating margins, and adjusted diluted earnings per share of $0.65. We enhanced VLOV's lifestyle brand positioning by delivering a more distinct fashion-forward point of view in our collections, while also providing the customer with a more compelling shopping environment. In fact, we are particularly proud to note that the Company received China Fashion Week's prestigious Menswear Design Award for 2009. We also streamlined VLOV's distributor relationships, dedicating our resources only to best-in-class partners who can assist us in taking the VLOV brand to the next level."
Full Year 2009
Full year 2009 net sales increased 24% to $64.3 million, reflecting continued strong demand for the Company's fashion-forward apparel. Gross profit for the year increased 25% to $23.3 million versus $18.6 million in 2008, while gross margin improved to 36.2% compared to 35.8% in 2008, primarily due to the Company's enhanced outsourcing strategy.
Operating expenses were $9.7 million, or 15.1% of sales, compared to $6.2 million, or 12.0% of sales in 2008. The year-over-year increase is primarily attributable to higher promotional and advertising expenses and reflects the Company's focus on further increasing awareness of the VLOV brand. Income from operations in 2009 was $13.6 million, an increase of 10% over $12.3 million in 2008.
Net income attributable to common shareholders in 2009 came in at $6.4 million, or $0.40 per diluted share compared to $9.2 million, or $0.63 per diluted share in 2008. Net income was $10.4 million in 2009, representing year-over-year growth of 14%(1). Adjusted diluted earnings per share (non-GAAP) came in at $0.65 on an additional 1.8 million shares outstanding(1). The increase in share count from 14.6 million in 2008 to 16.4 million in 2009 reflects the issuance of preferred and common shares and common stock purchase warrants in the fourth quarter of 2009.
At December 31, 2009, the Company was in strong financial condition with $11.0 million in cash and cash equivalents, $16.8 million in working capital and no long-term debt. Cash flow from operations in 2009 totaled $5.7 million.
Mr. Wu continued, "We completed a $10.0 million capital raise in the fourth quarter of 2009, which provides us with the financial flexibility to pursue our growth strategies. Our plans for 2010 include both brand and store level initiatives. We will be refurbishing selected shop-in-shops and
free-standing locations as we introduce a new generation of stores that more effectively conveys our contemporary, chic and stylish brand positioning. We will also be increasing the breadth and depth of our product offerings to better meet the needs of our target customer. Importantly, the brand will be supported by targeted marketing programs and new imagery designed to communicate our enhanced lifestyle positioning and appeal to VLOV's 15-34 year old demographic. In 2010, we expect to increase our marketing spend to approximately 8 to 10 percent of total revenue, which compares to 5 percent in 2009.
"We believe these actions will enable us to build increased awareness and excitement around the VLOV brand, while at the same time allowing us to extend our reach to new geographic regions and consumers throughout China. This year we expect to expand into additional provinces, primarily through shops in high-end department stores, as well as flagship VLOV stores. Looking further ahead, we plan to leverage VLOV's strong brand recognition to develop a presence in more densely populated, higher income Tier I cities."
Mr. Wu concluded, "Our target demographic accounts for the greatest wealth creation in China today. VLOV's customers are fashion-conscious men, who seek sophisticated, stylish and chic brands. As we continue to execute on our strategic and operational initiatives, we believe our efforts will strengthen our competitive position, enabling VLOV to capture an increasing share of the market over the long-term. We're in strong financial condition and the business continues to generate solid cash flow, affording us the flexibility to pursue our growth plans and create shareholder value."
(1) Adjusted diluted earnings per share is a non-GAAP measure that the
Company uses as a metric to provide information about its operating
trends and is considered an important metric in evaluating its
business. The Company calculates adjusted diluted earnings per share
by excluding the impact of the deemed dividend of $4.0 million on
Series A Convertible Preferred Stock.
About VLOV, Inc.
VLOV, Inc., a leading lifestyle apparel designer based in China, designs, sources and markets VLOV brand apparel for men ages 15 to 34. VLOV products are sold at more than 730 points of sale throughout northern, central and southern China. For more information, please visit http://www.vlov.com.cn .
Safe Harbor Statement
This press release contains certain statements that may include "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes, expects, anticipate, optimistic, intend, will" or similar expressions. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in VLOV's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov . All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
VLOV, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands - except for share and per share data)
December 31, December 31,
2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $11,036 $2,863
Pledged bank deposits -- 88
Accounts and other receivables 9,191 7,843
Amount due from a director 2,428 --
Trade deposits 2,309 --
Inventories 285 514
Prepaid expenses 763 --
Total current assets 26,012 11,308
Property, plant and equipment, net 966 1,067
Land use rights 263 272
TOTAL ASSETS $27,241 $12,647
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $2,565 $2,040
Accrued expenses and other payables 583 543
Amount due to a director 30 2
Bills payable -- 293
Derivative liability 3,684 --
Short-term bank loans 734 587
Income taxes payable 1,601 1,613
Total current liabilities 9,197 5,078
Non-current Liabilities:
Other payable 75 --
Total liabilities 9,272 5,078
Commitments -- --
Stockholders' Equity:
Common stock, $0.00001 par value,
100,000,000 shares authorized,
16,667,957 and 14,560,000 shares
respectively issued and outstanding 1 1
Preferred stock, $0.00001 par value,
100,000,000 shares authorized,
2,796,721 shares issued and outstanding
(liquidation preference $7,998,622) 4,003 --
Additional paid-in capital 6,319 1,236
Statutory reserve 913 913
Retained earnings 6,173 4,876
Accumulated other comprehensive income 560 543
Total stockholders' equity 17,969 7,569
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,241 $12,647
VLOV, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands - except for share and per share data)
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
(unaudited) (unaudited)
Net sales $18,521 $11,822 $64,343 $51,867
Cost of sales 11,766 7,677 41,080 33,316
Gross profit 6,755 4,145 23,263 18,551
Operating expenses:
Selling expenses 1,704 575 4,604 3,547
General and
administrative
expenses 3,519 623 5,090 2,702
5,223 1,198 9,694 6,249
Income from
operations 1,532 2,947 13,569 12,302
Other income (expenses):
Change in fair value
of derivative liability 1,009 -- 1,009 --
Interest income 18 10 31 23
Interest expense (15) (17) (58) (67)
1,012 (7) 982 (44)
Income before provision
for income taxes 2,544 2,940 14,551 12,258
Provision for
income taxes 923 699 4,106 3,065
Net income 1,621 2,241 10,445 9,193
Other comprehensive
income:
Foreign currency
translation adjustment 4 28 17 334
Comprehensive income $1,625 $2,269 $10,462 $9,527
Net income 1,621 2,241 10,445 9,193
Less: Deemed dividend
on Series A Convertible
Preferred Stock 4,003 -- 4,003 --
Net (loss) income
attributable to
common shareholders $(2,382) $2,241 $6,442 $9,193
Basic (loss) earnings
per share $(0.15) $0.15 $0.41 $0.63
Diluted (loss)
earnings per share $(0.14) $0.15 $0.40 $0.63
Weighted average number
of common shares and
participating
preferred shares
outstanding:
Basic 16,234,634 14,560,000 15,898,584 14,560,000
Diluted 16,434,789 14,560,000 15,949,034 14,560,000
VLOV, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousand)
Year Ended December 31,
2009 2008
Cash flows from operating activities:
Net income $10,445 $9,193
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 90 107
(Gain)/loss on disposal of property,
plant and equipment (2) 1
Change in fair value of
derivative liability (1,009) --
(Increase) decrease in assets:
Accounts receivable (3,057) (2,961)
Trade deposits (2,307) -
Inventories 228 4,446
Prepaid expenses (764) 144
Increase (decrease) in liabilities:
Accounts payable 525 (1,577)
Bills payable, accrued expenses and
other payables 1,531 (471)
Income and other tax payables (12) 145
Net cash provided by operating activities 5,668 9,027
Cash flows from investing activities:
Purchases of property, plant and equipment -- (61)
Disposals of property, plant and equipment 23 7
Amount due to/from a director 28 168
Net cash provided by investing activities 51 114
Cash flows from financing activities:
Pledged bank deposits 88 --
Amount due from a director (2,428) --
Proceeds from equity financing 9,776 --
Proceeds from debt financing 733 587
Payments of short-term debt (586) (587)
Payments of dividend (5,131) (9,389)
Net cash provided by (used in)
financing activities 2,452 (9,389)
Effect of exchange rate changes 2 353
Net increase in cash and
cash equivalents 8,173 105
Cash and cash equivalents, beginning of year 2,863 2,758
Cash and cash equivalents, end of year $11,036 $2,863
Supplemental disclosure of cash flow information:
Interest paid $58 $67
Income taxes paid $3,528 $3,209
(1) About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for financial and operational decision making, and as a means to evaluate period-to-period comparisons. The Company believes that these non-GAAP financial measures are useful to investors because they exclude a one-time deemed dividend on Series A Convertible Preferred Stock that our management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of VLOV. Accordingly, management excludes the one-time deemed dividend when making operational decisions. The Company believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. 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 of which charges are excluded from the non-GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides a reconciliation of non-GAAP earnings per share to the equivalent GAAP measure.
Fourth Quarter
Ended Year Ended
December December December December
31, 31, 31, 31,
(in thousands, except per
share data) 2009 2008 2009 2008
Net income (loss) attributable
to common shareholders $(2,382) $2,241 $6,442 $9,193
Earnings per share:
Basic $(0.15) $0.15 $0.41 $0.63
Diluted $(0.14) $0.15 $0.40 $0.63
Deemed Dividend on Series A
Convertible Preferred Stock $4,003 $4,003
Net income $1,621 $2,241 $10,445 $9,193
Non-GAAP earnings per share:
Basic $0.10 $0.15 $0.66 $0.63
Diluted $0.10 $0.15 $0.65 $0.63
For more information, please contact:
Christine Greany
HC International, Inc.
Tel: +1-858-523-1732
Email: christine.greany@hcinternational.net
Web: http://www.hcinternational.net
Howard Gostfrand
American Capital Ventures, Inc.
Tel: +1-305-918-7000
Email: hg@amcapventures.com
Web: http://www.amcapventures.com
