SHENZHEN, China; LOS ANGELES, CA (PRWEB) May 19, 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 http://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.”
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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 http://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)
