Company description::
For Immediate Release
May 17, 2004
Industries International Reports 23% Rise in Revenues for First Quarter of 2004
SHENZHEN, China and LOS ANGELES - May 17, 2004 - Chairman Sees Continued Sales Growth and Profitability for Remainder of 2004 to be Fueled Primarily by Sales of Telecom-Related Products
First Quarter Highlights:
-- Revenues grew 23% year-over-year driven primary by rise in sales of phone products
-- Excluding one-time extraordinary item, Company achieves net income of $1.29 million, an increase of over 30% from net income of $897,000 in year-ago quarter
-- Including extraordinary item, Company reports loss of ($525,000), or ($0.02) per share compared with net income of $897,000, or $0.05 in year-ago quarter
-- Company strengthens balance sheet with over $33.9 million in cash, or $1.20 per share, with only $2.42 million in long-term debt
-- INDI Receives Largest Order Ever -- $20 Million Contract to Manufacture Bell(R) Telephones
Industries International, Inc. (OTCBB: IDUL) (INDI), a rapidly growing manufacturer and distributor of communications-related technology and batteries in China, today reported financial results for the first quarter ending March 31, 2004. Revenue totaled $14.09 million, up approximately 23% from $11.45 million reported in the first quarter of 2003.
Telephone-Related Products Drive Revenue Growth
The revenue growth during the first quarter was primarily due to increased sales of INDI's communications terminal products, primarily corded and cordless telephones. The telecom equipment division reported first-quarter 2004 revenue of $8.79 million, up 32% from $6.64 million a year earlier. The increase was due to new revenue channels and the expansion of old ones. Sales of lithium and lithium-ion batteries, the Company's other source of revenue, were $5.30 million in the latest quarter, up 10% from $4.81 in the first quarter of 2003.
First Quarter Net Income, Excluding Extraordinary Item, Increases by over 30%
During the first quarter, INDI recorded a one-time extraordinary item of $1.81 million relating to the Company's stock compensation plan. Excluding this item, the Company's first quarter 2004 net income would have been $1.29 million, or $0.05 per share, an increase of over 30% from earnings of $897,000, or $0.05 per share, in the year-ago quarter. Including this item, the Company reported a net loss for the first quarter of 2004 of ($525,000), or ($0.02) per fully diluted share, compared to net income of $897,000, or $0.05 per fully diluted share in the year-ago quarter.
"We are very pleased with our financial and operational performance for the first quarter, which extends our track-record of growing over 20% year-over-year," said Dr. Kit Tsui, Chairman and Chief Executive Officer of Industries International. "Our overall growth of over 20% coupled with 32% growth in our terminal products is strong evidence that we are successfully beginning to penetrate the enormous demand among Chinese consumers for the latest in phone technology. The increase in our battery business was more modest, but it showed that demand for our products is rising steadily from OEMs in various industries, from telecom to transportation."
Continued Financial Improvements Across Business Segments
Across both divisions of INDI, the combined cost of manufacturing and other costs of sales rose to $10.17 million in the first quarter of 2004 from $8.02 million a year earlier, leaving a gross profit of $4.01 million, up 15.7% from $3.47 in the first quarter of 2003. Gross profit margin fell year-over-year to 28.3% from 30.2%. The overall margin decrease was related to an increase in operating costs and expenses due to the Company's entry into lower margin but higher volume product lines. INDI expects its margins to steadily improve going forward as it reaches a critical mass and, more significantly, once it begins manufacturing and delivering on its $20 million contract from Unical Enterprises, Inc. to manufacture Bell(R) Phones.
Sales and marketing expenses decreased approximately 14% to $467,000 from $540,000 a year earlier, due primarily to lower advertising costs. General and administrative expenses rose 46%, to $668,000 in the first quarter of 2004 from $457,000 a year earlier. The Company attributed the rise to start-up costs relating to the Company's new corporate office in Los Angeles. Research and development expenses decreased 3.1%, to $281,000 from $290,000, mainly because of reduced use of raw materials in R&D. Depreciation and amortization expenses decreased 14.7% in the first quarter of 2004, to $116,000 from $136,000 in the first quarter of 2003. The Company noted that it shifted its production strategy to an Original Equipment Manufacturer (OEM) methodology during 2003 and had outsourced all of its manufacturing activities by the end of that year.
The category of other operating costs and expenses experienced an increase to $1.99 million in the first quarter of 2004 from $150,000 a year earlier. As mentioned earlier, the primary expense in this category was a $1.81 million expense due to the Company's equity compensation plan.
Company Strengthens Balance Sheet
On March 31, 2004, INDI reported cash and cash equivalents of $33.9 million, up from $32.6 million on December 31, 2003 with only $2.4 million in long-term debt. Of the $33.9 million, approximately $11.8 million represented restricted cash. Cash, net of long-term debt, stood at approximately $31.5 million, or $1.11 per share, based on 28,322,000 weighted average shares outstanding on March 31, 2004. The Company's current ratio was 1.71 on March 31, 2004, up from 1.58 at the end of 2003. Dr. Tsui commented, "The significant improvements in our balance sheet, with over $30 million in cash and virtually no long-term debt, should provide us with the financial flexibility to execute on a number of growth strategies we have in the pipeline for the remainder of 2004 and beyond."
Company Raises $5.8 Million Towards Acquisition of Hong Kong Software Company
During the first quarter, INDI raised $5.8 million through the issuance of 2,521,745 new shares of common stock to a group of institutional investors as part of a private equity financing. The proceeds of the financing is expected to be used towards financing its proposed acquisition of a leading Hong Kong-based software company that distributes semiconductors, microchips and micro-controller units (MCUs). The acquisition, when complete, will provide INDI with a fully vertically integrated operation, including a supply of MCUs, R&D and production and distribution of final products. The target company, which has grown over double digits since its inception, is one of the fastest growing, profitable and high-tech software companies in Hong Kong.
INDI Receives $20 Million Order to Manufacture Bell(R) Phones
During the first quarter, the Company announced that it has received an order totaling $20 million from US-based Unical Enterprises, Inc. to manufacture Bell(R) phones by Northwestern Bell Phones www.nwbphones.com and Mountain Bell brand cordless telephones. The contract represents over 50% of INDI's 2003 sales for its telecom subsidiary and, more importantly, will serve as the catalyst for INDI's aggressive international growth plans since the phones will be sold in the U.S., Europe and China. The initial order will be for Bell's 5.8 GHz model cordless telephones, the most technologically advanced cordless telephones on the market today. INDI has already begun the manufacturing of these phones and expects initial revenue contributions to be recognized beginning in the second quarter of 2004.
Company Provides Positive Guidance for 2004
"During the first quarter, we expended significant management time and energy to relocate our corporate offices to the United States, initiate and complete our largest order yet -- a $20 million order to manufacture Bell telephones -- and to grow our business across all segments by a minimum of 20%," said Dr. Tsui. "The success of these goals coupled with a number of new strategic initiatives to be announced later have laid the foundation for accelerated growth for INDI for the remainder of 2004. Based only on the contracts on-hand and a strong pipeline of potential new customers, we believe we will continue to achieve 20% plus growth in both revenues and earnings for the remainder of the year. The growing Chinese demand for telecom-related products combined with the rising affluence of the average Chinese customer -- a reflection of China's economy -- should enable us to meet our financial and operational goals and enhance shareholder value."
If you would like to be added to IDUL's investor email lists, please contact Zack Noory with Investor Relations International at znoory@irintl.com.
About Industries International
Industries International Incorporated is comprised of two wholly-owned subsidiaries, Broad Faith, Limited, and Li Sun Power International, Limited. Broad Faith is engaged in the development, production and distribution of communications terminal products, mainly corded and cordless telephones which are sold under the trademark Wondial(TM) throughout China. Its other wholly-owned subsidiary, Li Sun Power International Limited, engages in the manufacturing of lithium and lithium-ion batteries and testing equipment for chemical composition and functioning of batteries. For further information, please visit the Company's website at www.industriesintl.com.
Safe Harbor Statement -- This press release contains forward-looking statements that involve risks, uncertainties and assumptions that, if they never materialize or if they prove incorrect, could cause the Company's results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenue, or other financial items, any statements of the plans, strategies, and objectives of management for future operations, any statements concerning proposed new products, services or developments, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations as of the date of this press release. Actual results may differ materially from those projected because of a number of risks and uncertainties, including those detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company assumes no obligations and does not intend to update these forward-looking statements.
[Financial Tables to Follow]
INDUSTRIES INTERNATIONAL INCORPORATED
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(Unaudited)
For Three Months Ended March 31,
2004
(in USD) 2003 (in USD)
Operating revenues
Net sales $ 14,091 $ 11,454
Rental income 97 29
Total operating revenues 14,188 11,483
Operating expenses
Manufacturing and other costs of sales 10,174 8,015
Sales and marketing 467 540
General and administrative 668 457
Research and development 281 290
Depreciation and amortization 116 136
Other operating costs and expenses 1,988 150
Total operating expenses 13,694 9,588
Operating income 494 1,895
Interest expenses (208) (262)
Other (expenses) income, net 46 27
Income before income taxes and minority interest 333 1,658
Provision for income taxes (291) (174)
Income before minority interest 42 1,484
Minority interest in income of combined subsidiaries (567) (587)
Net income (loss)
$ (525)
$ 897
Net income, excluding one-time non-cash stock compensation expense
$ 1,290
$ 897
Earnings (loss) per share:
Basic weighted average number of common stock outstanding 28,322 19,256
Basic net income (loss) per common stock
$ (0.02)
$ 0.05
Basic net income per common stock, excluding one-time
non-cash stock compensation expense
$ 0.05
$ 0.05
~ more ~
INDUSTRIES INTERNATIONAL INCORPORATED
CONDENSED COMBINED BALANCE SHEETS
(amount in thousands, except per share data)
(Unaudited)
As of March 31, 2004 As of December 31, 2003
(in USD) (in USD)
ASSETS
Current assets:
Cash and cash equivalents * $ 33,897 $ 32,607
Marketable securities 715 -
Guaranteed investment contract 1,210 1,210
Accounts receivable, net 17,600 19,034
Due from related parties, director and employees 6,168 1,821
Inventories 4,816 3,064
Prepaid expenses and other current assets 1,870 2,274
Total current assets 66,276 60,010
Goodwill 1,761 1,761
Property, plant and equipment, net 8,888 9,136
Total assets $ 76,925 $ 70,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Debts maturing within one year $ 11,795 $ 11,795
Accounts payable – trade 7,808 7,142
Due to principal stockholder 7,945 7,840
Other payable 5,420 5,420
Tax payable 905 967
Accrued expenses and other accrued liabilities 4,896 4,883
Total current liabilities 38,769 38,047
Non-current liabilities
Long-term debts 2,419 2,419
Minority interests in combined subsidiaries 9,660 10,878
Stockholders’ equity:
Common stock 1,204 1,102
Additional paid-in capital 25,139 18,750
Deferred stock compensation (11,951) (12,500)
Dedicated reserves 3,705 3,479
Retained earnings 8,616 8,732
Accumulated other comprehensive loss (636) -
Total stockholders’ equity 26,077 19,563
Total liabilities and stockholders’ equity $ 76,925 $ 70,907
* Amount includes $11,795,000 in restricted cash
~ more ~
INDUSTRIES INTERNATIONAL INCORPORATED
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(amount in thousands)
(Unaudited)
Three months ended March 31, Twelve months ended December 31,
2004 2003
(in USD) (in USD)
Cash flows from operating activities
Net income $ (525) $ 1,182
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 116 1,880
Minority interest in net income of consolidated subsidiaries 567 3,314
Non-cash compensation costs 1,813 3,979
Provision for doubtful accounts (72) 213
Net loss on sales, disposal or impairment of long-lived assets and marketable securities, net - 128
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net 1,434 (2,605)
Inventories, net (1,752) 1,386
Due from related parties (4,347) (130)
Due from directors and employees (1,563) 22
Prepaid expenses and other current assets 404 1,827
Accounts payable - Trade 666 577
Due to principal stockholder 105 (205)
Due to related parties 0 (163)
Tax payable (62) (454)
Accrued expenses and other accrued liabilities 13 (446)
Net cash provided by operating activities $ (3,203) $ 10,505
Cash flows provided by (used in) investing activities
Acquisition of subsidiaries, net of cash - -
Acquisition of marketable securities (715) -
Acquisition of guaranteed investment contract - -
Purchase of property, plant and equipment (21) (830)
Proceeds on disposal of marketable securities - 1,541
Proceeds on disposal of property, plant and equipment 3 8,877
Net cash provided by (used in) investing activities $ (733) $ 9,588
Cash flows used in financing activities
Issue of share capital 5,226 -
Borrowings of short-term debt 1,814 11,799
Repayments of short-term debt (1,814) (17,064)
Borrowings of long-term debt - 2,420
Net cash from (used in) financing activities $ 5,226 $ (2,845)
Net increase (decrease) in cash and cash equivalents 1,290 17,248
Cash and cash equivalents, beginning of fiscal year 32,607 15,359
Cash and cash equivalents, end of fiscal year $ 33,897 $ 32,607
SOURCE: Industries International Incorporated
Industries International Incorporated is a featured company on www.China-AsiaStocks.com
For full details, click here: http://www.investorideas.com/Industries_International/NewsReleases.asp
INDI
Lloyd Wang, 310-441-1888
or
Investor Relations International
Zack Noory, 818-382-9718
znoory@irintl.com
|
