Attached files
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| 8-K - SINOHUB, INC. | f11111108k.htm |
Exhibit 99.1
SINOHUB, INC. ANNOUNCES 2011 THIRD QUARTER
FINANCIAL RESULTS
SHENZHEN, China, November 14, 2011 – SinoHub, Inc. (“SinoHub” or the “Company”), (NYSE Amex: SIHI), an electronics company whose main growth driver is manufacturing and distributing custom, private-label mobile phones, today announced its unaudited financial results for the third quarter ended September 30, 2011.
THIRD QUARTER 2011 FINANCIAL HIGHLIGHTS
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–
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Total net sales declined year-over-year to US$52.0 million in the third quarter of 2011 compared to US$55.8 million in the third quarter of 2010.
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–
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Gross profit was US$6.3 million compared to US$10.2 million in the same quarter in 2010. Gross margin was 12.1% compared to 18.3% in the third quarter of 2010.
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–
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Cash used in operations was US$17.6 million, compared with US$4.7 million in the third quarter of 2010.
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–
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Net income was US$2.6 million, down from US$6.0 million in the third quarter of 2010.
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–
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Net income per basic and diluted share were both US$0.08, down from US$0.21 per basic and diluted share, in the third quarter of 2010.
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BUSINESS HIGHLIGHTS:
Commenting on the results, SinoHub’s CEO, Mr. Harry Cochran said, “Our results for the third quarter were largely in line with our expectations, as we continued to be impacted by the decline in ICM revenue following the cut back in orders from a major customer in the second quarter. While we have not yet replaced all of the revenue lost from this key customer, our results have stabilized thanks to our progress on the business development front. In fact, we have successfully broadened our base of smaller ICM customers placing higher margin orders, which led to an improvement in our ICM gross profit margin from the low in the previous quarter. We have also made significant inroads with a number of large developing market mobile phone operators. For example, Philippine Long Distance Telephone Company (PLDT), owners of Smart Communications, Inc, the leading wireless services provider in the Philippines, recently added SinoHub to their List of Accredited Suppliers for Mobile Phones (Private label) for a three year period. This marks a significant step in the sales process with one of the largest mobile phone operators in Southeast Asia, and while we have not yet secured any orders, we are working hard to move this relationship to the order phase.
“The process to shift the electronic component sales part of our ECSS segment to a brokerage model is ongoing, and we expect to make further progress here in the fourth quarter of 2011. This transition is necessary as we continue to focus our resources on developing our ICM business segment.
“Looking ahead, we remain committed to our long-term strategy to deepen penetration of the mobile device market in developing nations and in other international markets, including North and South America. We believe that our joint design process and our track record of delivering high quality phones with minimal lead times and flexible order quantities continue to provide us with clear competitive advantages. While we may continue to face near-term pressure in the short term, we remain confident that our rate of growth in the ICM business segment will rebound in the year ahead.”
Lei Xia, President of SinoHub, added, “We are delighted to become an accredited supplier to PLDT after a thorough due diligence process run by Dun & Bradstreet on their behalf. With forty-eight million subscribers, Smart Communications has a dominant position in their market, and we look forward to establishing a strong long-term relationship with them.”
THIRD QUARTER 2011 FINANCIAL RESULTS
Net Sales
Net sales for the third quarter of 2011 were US$52.0 million, representing a decrease of 7.3% from US$55.8 million in the third quarter of 2010. The year-over-year decrease was primarily attributable to a decline in sales in the Company’s ICM business segment. Sales in the ICM business segment in the third quarter of 2011 were US$16.9 million, down 11.4% from US$19.0 million in the third quarter of 2010 as the Company was not successful in replacing all of the revenue that was lost when a major customer had to drastically cut back on orders with SinoHub starting in the second quarter of 2011 due to inventory problems at the customer.
Net sales from the electronic component sales and supply chain management services segment (collectively ECSS) for the third quarter of 2011 were US$35.1 million, a year-over-year decrease of 4.4% from US$36.7 million in the third quarter of 2010. The primary reason for the decrease in the ECSS business segment was the increasing maturity of the 2G market and the lack of clear leadership in the 3G market. This contrasts with the plentiful arbitrage opportunities that existed in the past in the 2G market when Mediatek had a dominant position and the technology was changing very rapidly.
The Company has begun the process of shifting the electronic component sales (ECP) portion of our ECSS segment, which constitutes most of this segment, to a brokerage model from our current model where we take ownership of components. This should result in much lower revenue (the Company will only be able to record commissions as revenue instead of the full value of the components), but much higher gross margins.
Gross Profit and Margin
Gross profit for the quarter was US$6.3 million, down 61.9% from US$10.2 million in the third quarter of 2010. Gross margin for the quarter was 12.1%, down from 18.3% in the third quarter of 2010. However, in the three months ended September 30, 2011, gross margins in ICM recovered to 16.2% from the low level in the three months ended June 30, 2011 as the Company’s sales initiatives to broaden our base of ICM customers started to pay off.
Operating Expenses
Operating expenses, including selling, general and administrative (SG&A) expenses, professional services and other operating income was US$2.7 million, unchanged from US$2.7 million in the third quarter of 2010.
Income from Operations
Income from operations for the quarter was US$3.6 million, or 6.9% of sales, as compared to operating income of US$7.5 million, or 13.4% of sales in the third quarter of 2010.
Income Taxes
The Company recorded US$1.1 million of income tax expenses in the third quarter of 2011, versus the US$1.9 million of income tax expenses it recorded in the corresponding period in 2010. The reason for the decrease is that there was less taxable income. However, because taxes are calculated on a subsidiary level, resulting in losses in one subsidiary not offsetting gains in another for tax purposes, the decrease is not proportional to the decrease in income, which is calculated on a consolidated basis.
Net Income
Net income attributable to SinoHub’s shareholders was US$2.6 million, compared to US$6.0 million in the third quarter of 2010. Net margin was 5.0%, as compared to 10.8% in the third quarter of 2010. Net income per basic and diluted shares were both US$0.08, down from US$0.21 per basic and diluted share, in the third quarter of 2010, based on 33.5 million weighted average, basic and diluted shares outstanding.
Liquidity and Capital Resources
As of September 30, 2011, the Company had US$7.0 million in cash and cash equivalents, an increase from US$4.5 million as of December 31, 2010 resulting primarily from new money raised in the first half of 2011. The Company had working capital of US$75.5 million on September 30, 2011, up from US$57.5 million at the end of 2010, and a current ratio of 1.6 to 1 on September 30, 2011.
As of September 30, 2011, the Company had approximately US$7.0 million available to borrow under its credit facilities.
During the nine months ended September 30, 2011, the net amount of cash used in the Company’s operating activities was US$17.6 million, compared to US$4.7 in the same period in 2010, which was mainly attributable to the increase in inventories and accounts receivable.
As of September 30, 2011, inventories were approximately US$37.1 million and accounts receivable were US$60.2 million, compared to approximately US$14.6 million and US$45.7 million on December 31, 2010, respectively. The increase in inventory was related to our ICM business and the increase in accounts receivable resulted from lower collections in ECP in the quarter caused by a change in policy by the Chinese banks which had the effect of lowering credit availability for our customers.
Full-year 2011 Revenue Guidance
The Company reiterates its sales outlook of approximately 2.5 million mobile phones in 2011, and its full-year 2011 revenue guidance of approximately $195 million. The forecasts reflect the Company’s current and preliminary view, which is subject to change.
BUSINESS OUTLOOK
SinoHub is focused on expanding our ICM business segment by gaining new customers in Southeast Asia where we started and by entering new markets (primarily North and South America). In addition we have begun a strategic initiative to develop our own mobile phone brand in China, the world’s largest mobile phone market. As announced in June 2011, the Company received an application acceptance notice from the Trademark Office of the State Administration for Industry and Commerce of the PRC for the use of the Topolo™ brand name and logo in China, which SinoHub has selected as the brand name for its self-branded line of mobile phones to be sold in the China. The Company is currently in the process of securing a sales license to sell Topolo™ branded mobile phones in China, and expects to begin initial marketing efforts upon approval of its application for a sales license toward the end of Q1 2012.
CONFERENCE CALL
SinoHub’s senior management will host a conference call at 7:00 am (Pacific) / 10:00 am (Eastern) / 11:00 pm (Beijing/Hong Kong) on Monday, November 14, 2011 to discuss the Company’s 2011 third quarter financial results and recent business activity. To access the live teleconference, please dial +1-877-941-1428 (US) or +1-480-629-9665 (International), and reference the passcode 4487375. Please dial in approximately 10 minutes before the scheduled time of the call.
A replay of the conference call will be available shortly after the call until Monday, November 21, 2011, by dialing +1-877-870-5176 (US) or +1-858-384-5517 (International) and entering the passcode 4487375.
A listen-only webcast of the conference call will also be available on the investor relations page of SinoHub’s website at: http://www.sinohub.com.
About SinoHub, Inc. (NYSE Amex: SIHI)
SinoHub, Inc. (NYSE Amex: SIHI) is a leading electronics company based in Shenzhen, PR China which services clients worldwide. The Company’s integrated contract manufacturing (ICM) business unit is currently focused on providing custom, private label mobile phones to customers in developing countries. This ICM segment is capitalizing on a trend by carriers and distributors to offer their own brands with features and functionality targeted at their local markets, including 3G smart phones, at competitive price points. The Company’s electronic component sales and services (ECSS) business unit provides procurement-fulfillment, spot component sales and supply chain management (SCM) services to manufacturers and design houses. The company’s SCM services include warehousing, delivery, import/export, and give its customers total transparency into their supply chains by delivering SinoHub SCM, a proprietary, Web-based software platform the company has been using for almost ten years. For more information, visit the Company's Web site at http://www.sinohub.com and the B2B Chips Web site at http://www.b2chips.com.
Cautionary Statement Regarding Forward-looking Information
Some of the statements contained in this press release that are not historical facts constitute forward-looking statements under the federal securities laws. Forward-looking statements can be identified by the use of the words "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "potential," "proposed," or "continue" or the negative of those terms. These statements involve risks known to the Company, significant uncertainties, and other factors, many of which cannot be predicted with accuracy and some of which may not even be anticipated, which may cause actual results, levels of activity, performance, or achievements, or our published guidance, to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements. Such risks, uncertainties and factors include, but are not limited to, the Company’s ability to expand its customer base, the ability to access capital for such expansion, assumptions concerning future economic and competitive conditions and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
Except as required by law, the company assumes no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. For further information on factors which could impact SinoHub and the statements contained herein, see the "Risk Factors" included in Item 1A of the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission on March 14, 2011, as amended by Form 10-K/A filed with the Securities Exchange Commission on May 24, 2011. The company assumes no obligation to update and supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.
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SinoHub, Inc.
Grace Wang
Tel: + 86-755-2661-1080
Email: grace.wang@sinohub.com
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Investor Relations (Hong Kong)
Mahmoud Siddig
Taylor Rafferty
Tel: +852-3196-3712
Email: sinohub@taylor-rafferty.com
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Investor Relations (US)
Bryan Degnan
Taylor Rafferty
Tel: +1-212-889-4350
Email: sinohub@taylor-rafferty.com
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- Financial Tables to Follow -
SINOHUB, INC. AND SUBSIDIARIES
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September 30, 2011
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December 31, 2010
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(Unaudited)
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(As Restated)
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ASSETS
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 6,956,000 | $ | 4,524,000 | ||||
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Restricted cash
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94,749,000 | 32,059,000 | ||||||
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Accounts receivable, net
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60,207,000 | 45,686,000 | ||||||
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Note receivable
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1,523,000 | - | ||||||
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Inventories, net
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37,129,000 | 14,631,000 | ||||||
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Prepaid expenses and other current assets
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1,017,000 | 704,000 | ||||||
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Deposit with suppliers
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959,000 | 1,308,000 | ||||||
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Total current assets
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202,540,000 | 98,913,000 | ||||||
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PROPERTY AND EQUIPMENT, NET
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12,061,000 | 11,190,000 | ||||||
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TOTAL ASSETS
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$ | 214,601,000 | $ | 110,103,000 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES
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Accounts payable
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$ | 8,553,000 | $ | 865,000 | ||||
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Customer deposits
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1,172,000 | 107,000 | ||||||
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Accrued expenses and other current liabilities
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954,000 | 709,000 | ||||||
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Bank borrowings
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103,054,000 | 37,299,000 | ||||||
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Collateralized bank advances
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10,110,000 | - | ||||||
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Capital lease obligations – current portion
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793,000 | 756,000 | ||||||
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Income and other taxes payable
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2,437,000 | 1,712,000 | ||||||
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Total current liabilities
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127,073,000 | 41,449,000 | ||||||
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LONG-TERM LIABILITIES
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Capital lease obligations, net of current portion
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679,000 | 845,000 | ||||||
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Warrant Derivatives
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358,000 | 1,692,000 | ||||||
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Total long-term liabilities
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1,037,000 | 2,537,000 | ||||||
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TOTAL LIABILITIES
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128,110,000 | 43,987,000 | ||||||
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STOCKHOLDERS’ EQUITY
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Preferred stock, $0.001 par value, 5,000,000 shares authorized;
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no shares issued
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- | - | ||||||
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Common stock, $0.001 par value, 100,000,000 shares authorized;
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33,454,903 shares and 28,570,859 shares issued and outstanding
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as of September 30, 2011 and December 31, 2010, respectively
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33,000 | 29,000 | ||||||
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Additional paid-in capital
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30,791,000 | 20,122,000 | ||||||
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Retained earnings
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Unappropriated
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49,464,000 | 42,303,000 | ||||||
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Appropriated
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934,000 | 934,000 | ||||||
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Accumulated other comprehensive income
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5,269,000 | 2,730,000 | ||||||
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Total stockholders’ equity
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86,491,000 | 66,116,000 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 214,601,000 | $ | 110,103,000 | ||||
SINOHUB, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
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Three months ended September 30,
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Nine months ended September 30,
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2011
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2010
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2011
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2010
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(As Restated)
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(As Restated)
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NET SALES
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ECSS
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$ | 35,112,000 | $ | 36,727,000 | 88,326,000 | $ | 99,512,000 | |||||||||
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ICM
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16,854,000 | 19,024,000 | 42,531,000 | 38,723,000 | ||||||||||||
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Total net sales
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51,966,000 | 55,751,000 | 130,857,000 | 138,235,000 | ||||||||||||
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COST OF SALES
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ECSS
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31,528,000 | 29,816,000 | 76,637,000 | 81,540,000 | ||||||||||||
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ICM
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14,120,000 | 15,755,000 | 35,779,000 | 31,843,000 | ||||||||||||
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Total cost of sales
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45,648,000 | 45,571,000 | 112,416,000 | 113,383,000 | ||||||||||||
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GROSS PROFIT
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6,318,000 | 10,180,000 | 18,441,000 | 24,852,000 | ||||||||||||
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OPERATING EXPENSES
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Selling, general and administrative
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2,028,000 | 2,123,000 | 6,494,000 | 6,261,000 | ||||||||||||
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Professional services
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101,000 | 193,000 | 595,000 | 694,000 | ||||||||||||
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Depreciation
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502,000 | 479,000 | 1,510,000 | 1,051,000 | ||||||||||||
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Stock compensation expense
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- | 57,000 | - | 207,000 | ||||||||||||
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Stock option compensation amortization
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76,000 | 110,000 | 265,000 | 328,000 | ||||||||||||
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Provision for bad debts（write back of
allowance for doubtful accounts）
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33,000 | (236,000 | ) | 128,000 | (45,000 | ) | ||||||||||
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Total operating expenses
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2,740,000 | 2,726,000 | 8,992,000 | 8,496,000 | ||||||||||||
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INCOME FROM OPERATIONS
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3,578,000 | 7,454,000 | 9,449,000 | 16,356,000 | ||||||||||||
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OTHER INCOME (EXPENSE)
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Interest expense
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(708,000 | ) | (109,000 | ) | (1,813,000 | ) | (352,000 | ) | ||||||||
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Interest income
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595,000 | 41,000 | 1,379,000 | 145,000 | ||||||||||||
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Changes in fair values of warrant derivatives
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536,000 | 539,000 | 1,334,000 | 1,011,000 | ||||||||||||
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Other, net
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(344,000 | ) | 9,000 | 396,000 | 16,000 | |||||||||||
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Total other income, net
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79,000 | 480,000 | 1,296,000 | 820,000 | ||||||||||||
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INCOME BEFORE INCOME TAXES
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3,657,000 | 7,934,000 | 10,745,000 | 17,176,000 | ||||||||||||
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Income tax expense
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(1,075,000 | ) | (1,898,000 | ) | (3,583,000 | ) | (4,287,000 | ) | ||||||||
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NET INCOME
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2,582,000 | 6,036,000 | 7,162,000 | 12,889,000 | ||||||||||||
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OTHER COMPREHENSIVE INCOME
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Foreign currency translation gain
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891,000 | 909,000 | 2,539,000 | 1,017,000 | ||||||||||||
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COMPREHENSIVE INCOME
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$ | 3,473,000 | $ | 6,945,000 | $ | 9,701,000 | $ | 13,906,000 | ||||||||
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SHARE AND PER SHARE DATA
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Net income per share-basic
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$ | 0.08 | $ | 0.21 | $ | 0.22 | $ | 0.46 | ||||||||
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Weighted average number of shares-basic
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33,455,000 | 28,558,000 | 32,363,000 | 28,126,000 | ||||||||||||
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Net income per share-diluted
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$ | 0.08 | $ | 0.21 | $ | 0.22 | $ | 0.45 | ||||||||
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Weighted average number of shares-diluted
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33,478,000 | 28,721,000 | 32,416,000 | 28,362,000 | ||||||||||||
SINOHUB, INC. AND SUBSIDIARIES
CASH FLOWS (UNAUDITED)
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Nine months ended September 30,
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2011
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2010
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(As Restated)
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 7,162,000 | $ | 12,889,000 | ||||
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Adjustments to reconcile net income to cash used in operations:
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Depreciation - operating expenses
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1,510,000 | 1,051,000 | ||||||
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Depreciation - cost of sales
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1,252,000 | - | ||||||
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Stock compensation expense
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- | 207,000 | ||||||
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Stock option compensation amortization
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265,000 | 328,000 | ||||||
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Provision for bad debts( write back of allowance for doubtful accounts)
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128,000 | (45,000 | ) | |||||
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Loss on disposal of property and equipment
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18,000 | - | ||||||
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Changes in fair values of warrant derivatives
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(1,334,000 | ) | (1,011,000 | ) | ||||
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Changes in operating assets and liabilities:
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Accounts receivable
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(13,021,000 | ) | (16,578,000 | ) | ||||
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Note receivable
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(1,499,000 | ) | - | |||||
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Inventories
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(21,692,000 | ) | 3,187,000 | |||||
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Prepaid expenses and other current assets
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(291,000 | ) | 56,000 | |||||
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Deposit with suppliers
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367,000 | (4,628,000 | ) | |||||
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Accounts payable
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7,542,000 | (608,000 | ) | |||||
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Customer deposits
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1,065,000 | (1,313,000 | ) | |||||
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Accrued expenses and other current liabilities
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226,000 | 87,000 | ||||||
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Income and other taxes payable
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657,000 | 1,696,000 | ||||||
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Net cash used in operating activities
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(17,645,000 | ) | (4,682,000 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Increase of restricted cash
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(60,650,000 | ) | (3,129,000 | ) | ||||
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Purchase of property and equipment
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(3,335,000 | ) | (3,385,000 | ) | ||||
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Proceed from disposal of property and equipment
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9,000 | - | ||||||
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Net cash used in investing activities
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(63,976,000 | ) | (6,514,000 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from issuance of common stock, net of cost
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10,395,000 | 4,470,000 | ||||||
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Proceeds from exercise of options, net of costs
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15,000 | 22,000 | ||||||
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Bank borrowings - proceeds
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141,967,000 | 24,609,000 | ||||||
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Bank borrowings - repayments
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(78,470,000 | ) | (20,382,000 | ) | ||||
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Collateralized bank advances – proceeds
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20,102,000 | - | ||||||
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Collateralized bank advances – repayments
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(10,154,000 | ) | - | |||||
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Repayments of capital lease obligations
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(129,000 | ) | (647,000 | ) | ||||
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Net cash provided by financing activities
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83,726,000 | 8,072,000 | ||||||
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EFFECT OF EXCHANGE RATE CHANGES
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327,000 | 190,000 | ||||||
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NET INCREASE DECREASE IN CASH AND CASH EQUIVALENTS
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2,432,000 | (2,934,000 | ) | |||||
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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4,524,000 | 8,347,000 | ||||||
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CASH AND CASH EQUIVALENTS AT END OF PERIOD
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$ | 6,956,000 | $ | 5,413,000 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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Cash paid for interest
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$ | 1,813,000 | $ | 352,000 | ||||
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Cash paid for income tax
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$ | 2,540,000 | $ | 2,444,000 | ||||
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Equipment acquired under capital leases
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$ | - | $ | 2,436,000 | ||||