SGOCO Group, Ltd. Reports Unaudited Financial Results for the Fourth Quarter and Full Year 2012 PR Newswire BEIJING, April 19, 2013 BEIJING, April 19, 2013 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC), ("SGOCO" or the "Company"), a company focused on product design, distribution and brand development in the Chinese flat-panel display market, today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2012. Given the significant changes to SGOCO's business model and balance sheet pursuant to the Sale of Honesty Group in the fourth quarter of prior year, SGOCO considers year-over-year comparisons of financial results less relevant and quarter-over-quarter results more relevant. Q4 Financial Highlights oQuarterly revenues increased 143.5% to $63.4 million, as compared to $26.0 million quarter-over-quarter oGross margin was 7.7%, as compared to 3.6% quarter-over-quarter oNet income was $3.2 million, as compared to a net loss of $1.1 million quarter-over-quarter oDiluted earnings per share were $0.19, as compared to a diluted loss per share of $0.06 quarter-over-quarter. In the fourth quarter of 2012, total revenues increased by 143.5% to $63.4 million from $26.0 million quarter-over-quarter. Of the total revenues, the revenues generated from SGOCO brand sales were $41.1 million, or 64.8% of total revenues, as compared to $22.3 million, or 35.2% of total revenues generated from OEM businesses. As a percentage of total sales, overall gross margin for the fourth quarter of 2012 improved to 7.7% from 3.6% for the prior quarter. The gross margin for SGOCO brand products improved to 7.9%, as compared to 4.8% quarter-over-quarter. Selling, General and Administrative ("SG&A") expenses for the fourth quarter decreased $0.3 million, or 19.3% to $1.4 million from $1.7 million in the prior quarter. As a percentage of total revenues, the SG&A expenses were 2.2% and 6.5% for the fourth quarter and the prior quarter, respectively. The significant percentage decrease in the SG&A expenses in the fourth quarter was due to the payment of one-time professional fees to third parties for NASDAQ listing-related services. The fees were largely incurred in or prior to the third quarter of fiscal 2012. Net income for the fourth quarter of 2012 was $3.2 million, or 5.0% of total revenues, as compared to a loss of $1.1 million quarter-over-quarter. Diluted earnings per share for the quarter were $0.19, as compared to a diluted loss per share of $0.06 for the third quarter. Operational Results for the Fiscal Year 2012 For the fiscal year 2012, SGOCO's total revenues were $166.7 million, as compared to $313.1 million of the prior year. The year-over-year sales decrease was primarily attributable to changed client mix, reduced sales volumes, and decreased average selling price of our display products due to increased competition in China's general display market. During fiscal year 2012, 70.6% of sales were generated from SGOCO brand products and 29.4% of sales were derived from non-SGOCO brand products and OEM customers, which compared to 61.5% of sales generated from SGOCO brand products and 38.5% of sales derived from non-SGOCO brand, OEM clients, and other businesses in the prior fiscal year. Cost of goods sold decreased by $125.2 million, or 44.8% from $279.4 million to $154.2 million in fiscal year 2012. The decrease in the cost of goods sold was mainly due to reduced sales volumes for our display products. After the Sales of Honesty Group, our cost of goods sold consisted of the cost of finished products purchased from outsourced manufacturers, including Honesty Group and its subsidiaries. For fiscal year 2012, the amount of finished products purchased from Honesty Group and its subsidiaries after the Sale of Honesty Group was $119.3 million, or 77% of total purchases. Gross profit in fiscal year 2012 was $12.5 million as compared to $33.7 million for the previous fiscal year. As a percentage of total revenues, overall gross margin was 7.5% for the fiscal year 2012, as compared to 10.8% for the prior fiscal year. Overall gross margin during 2012 was negatively impacted by the increased fees charged by Chinese authorities for recycling imported monitors, price decreases for monitors, and added costs for outsourcing manufacturing as SGOCO does not own any manufacturing facility. In response to the intense competition in China's general display market, SGOCO has transitioned into a "light-asset" business model that concentrates on the development and distribution of its own SGOCO brands and licensed TCL and Founder brands, which had 8.4% in gross margin as compared to 6.2% gross margin for OEM products for the fiscal year of 2012. The Company also focuses on selling more application-specific products with higher gross margins. SG&A expenses for the fiscal year 2012 were $6.0 million, or 3.6% of total revenues, as compared with $7.5 million, or 2.4% of total revenues for the prior fiscal year. Included in the 2012 SG&A expenses was an approximately $1.7 million one-time expense in professional fees in relation to SGOCO's trading halt on Nasdaq and a change in auditors in 2012, which represented approximately 1% of total revenues. Net income for fiscal year 2012 was $4.2 million, as compared to $16.6 million for the previous fiscal year. The net income margins were 2.5% and 5.3% for the years ended December 31, 2012 and 2011, respectively. Diluted earnings per share were reported at $0.25 for fiscal year 2012. Balance Sheet and Cash Flow Highlights As of December 31, 2012, the Company held $11.5 million in cash and cash equivalents and $78.1 million in working capital. The current ratio was reported at 3.86 as of December 31, 2012. The strong liquidity ratios will continue to support SGOCO in the transition of its business model. Total net cash inflow during fiscal year 2012 was $11.0 million, mainly consisted of $18.6 million provided by investing activities, $6.2 million provided by financing activities, offset by $13.8 million used in operating activities. For the fiscal year 2012, the average collection period ("ACP") was 87 days, as compared to 44 days year-over-year. Inventory turnover was 9 days in 2012, compared to 13 days for the prior fiscal year. The longer payment terms SGOCO provided to its distributors was largely due to the Company's efforts in retaining quality distributors in the face of increased competition in China's general display market. The improvement in inventory turnover stemmed from the Company's smaller position in inventory after the Sale of Honesty Group and better coordination between its sales and purchase departments after a revamping of its logistics system. The overall conversion cycle for accounts receivable and inventory days in 2012 were 96 days, which is within our targeted 80 to 100 days conversion cycle. Mr. Burnette Or, Chairman and Chief Executive Officer of SGOCO, commented: "We are very pleased to report a solid financial and operational performance for the fourth quarter and fiscal year 2012. In response to the increased competition in China's rapid-changing display market, SGOCO chose to transition from the manufacturing-focused business model to the R&D and distribution-focused model, to develop and distribute its own-branded products. We can see the benefits of moving upward in the value chain have started to be reflected in our operational results during this quarter." Outlook Mr. Or concluded, "We believe that the operational improvements shown in the fourth quarter of 2012 will continue in 2013, because we will allocate our resources to develop further SGOCO brand products. These include market-oriented, application-specific products customized for large industry end-users. We believe the focused distribution of these higher-margin products will create a foundation for establishing SGOCO as a leading supplier in China's flat-panel display market for years to come. We will continue striving to create long term value for our shareholders." Conference Call SGOCO's management will host a conference call at 8:30 a.m. Eastern Time/8:30 p.m. Beijing Time on Monday, April ^ 22, 2013. Interested parties may access the call by dialing 1-877-941-1427 (US Toll-free) or 1-480-629-9664 (International) or 400-120-0611 (China Toll-free). The Conference call identification number is 4610046#. A webcast will also be available via http://public.viavid.com/index.php?id=103940. A recording of the conference call will be accessible within 48 hours via SGOCO's website at: http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=13 About SGOCO Group, Ltd. SGOCO Group, Ltd. is focused on product design, brand development and distribution in the Chinese flat panel display market, including computer monitors, TVs and application specific products. SGOCO sells its products and services in the Chinese market and abroad. For more information about SGOCO, please visit our investor relations website http://www.sgocogroup.com. Safe Harbor and Informational Statement This announcement contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," "will," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company's multiple-brand, multiple channel strategy and the transitioning of its product development and sales focus and to a "light-asset" model, Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal control over financial reporting; our success in designing and distributing products under brands licensed from others; management of sales trend and client mix; possibility of securing loans and other financing without efficient fixed assets as collaterals; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED products in China; China's overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; changing principles of generally accepted accounting principles; compliance with government regulations; legislation or regulatory environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this press release and in the attachments is as of the date of the issuance, and SGOCO does not undertake any obligation to update any forward-looking statement, except as required under applicable law. For investor and media inquiries, please contact: SGOCO Group, Ltd. Serena Wu Investor Relations Manager Tel: +86 (10) - 85870173 (China) US: +1(646) - 5831616 (Voice mail) Email:firstname.lastname@example.org SGOCO GROUP, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED DECEMBER 31AND SEPTEMBER 30, 2012 (In thousands except share and per share data) Three Months Ended Three Months Ended December 31, 2012 September 30, 2012 REVENUES: Revenues 63,429 26,047 Revenues - related parties - - Total revenues 63,429 26,047 COST OF GOODS SOLD: Cost of goods sold 58,530 25,105 Cost of goods sold - related - - parties Total cost of goods sold 58,530 25,105 GROSS PROFIT 4,899 942 OPERATING EXPENSES: Selling expenses 211 212 General and administrative 1,156 1,482 expenses Total operating expenses 1,367 1,694 INCOME FROM OPERATIONS 3,532 (752) OTHER INCOME (EXPENSES): Interest income 5 1 Interest expense (9) (12) Other income (expense), net (94) (23) Change in fair value of warrant (0) 27 derivative liability Gain from disposal of subsidiaries - - Total other expenses, net (98) (7) INCOME (LOSS) BEFORE PROVISION FOR 3,434 (759) INCOME TAXES PROVISION FOR INCOME TAXES 281 331 NET INCOME 3,153 (1,090) OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation 26 (3) adjustment Realization of foreign currency translation gain relating to - - disposal of subsidiaries COMPREHENSIVE INCOME (LOSS) 3,179 (1,093) EARNINGS (LOSS) PER SHARE: Basic 0.19 (0.06) Diluted 0.19 (0.06) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic 17,058,726 17,059,860 Diluted 17,058,726 17,059,860 SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 (In thousands except share and per share data) 2012 2011 2010 REVENUES: Revenues 166,701 313,136 204,683 Revenues - related parties - - 12,618 Total revenues 166,701 313,136 217,301 COST OF GOODS SOLD: Cost of goods sold 154,221 279,399 174,316 Cost of goods sold - related parties - - 10,286 Total cost of goods sold 154,221 279,399 184,602 GROSS PROFIT 12,480 33,737 32,699 OPERATING EXPENSES: Selling expenses 670 1,706 700 General and administrative expenses 5,322 5,779 6,443 Total operating expenses 5,992 7,485 7,143 INCOME FROM OPERATIONS 6,488 26,252 25,556 OTHER INCOME (EXPENSES): Interest income 8 288 90 Interest expense (61) (2,074) (1,021) Other income (expense), net (130) (248) (892) Change in fair value of warrant derivative liability 75 (287) 925 Gain from disposal of subsidiaries - 127 - Total other expenses, net (108) (982) (2,110) INCOME BEFORE PROVISION FOR INCOME TAXES 6,380 25,270 23,446 PROVISION FOR INCOME TAXES 2,167 8,651 3,514 NET INCOME 4,213 16,619 19,932 OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation adjustment (59) 84 1,772 Realization of foreign currency translation gain relating to disposal of subsidiaries (3,815) - - COMPREHENSIVE INCOME 4,154 12,888 21,704 EARNINGS PER SHARE: Basic 0.25 1.03 2.13 Diluted 0.25 1.02 1.86 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic 17,059,575 16,086,598 9,354,186 Diluted 17,059,575 16,288,242 10,705,957 SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2012 AND 2011 (In thousands except share and per share data) 2012 2011 ASSETS CURRENT ASSETS Cash 11,548 535 Accounts receivable, net 59,355 19,680 Other receivables and prepayments 169 757 Consideration receivable from Sale of Honesty Group - 57,478 Inventories 5,725 1,864 Advances to suppliers 28,511 4,609 Other current assets 78 60 Total current assets 105,386 84,983 PLANT AND EQUIPMENT, NET 261 218 Total assets 105,647 85,201 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term loan 6,230 - Accounts payable, trade 12,038 4,609 Accrued liabilities 156 353 Short-term loan - shareholder 209 209 Other payables 379 344 Customer deposits 1,155 153 Taxes payable 7,147 5,552 Total current liabilities 27,314 11,220 OTHER LIABILITIES Warrant derivative liability 18 93 Total liabilities 27,332 11,313 Commitment and contingencies SHAREHOLDERS' EQUITY Preferred stock, $0.001 par value, 1,000,000 shares authorized, nil issued and outstanding as of - - December 31, 2012 and December 31, 2011 Common stock, $0.001 par value, 50,000,000 shares authorized, 17,465,356 and 17,258,356 shares issued 17 17 and outstanding as of December 31, 2012 and 2011, respectively Paid-in-capital 24,828 24,555 Statutory reserves 401 54 Retained earnings 53,044 49,178 Accumulated other comprehensive income 25 84 Total shareholders' equity 78,315 73,888 Total liabilities and shareholder's equity 105,647 85,201 SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 (In thousands) 2012 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 4,213 16,619 19,932 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation 69 1,369 1,506 Amortization - 91 105 Bad debt provision - 191 1,947 Change in fair value of warrant derivative (75) (925) 287 liability Share-based compensation expenses 273 - - Gain from disposal of subsidiaries - (127) - Change in operating assets Accounts receivable, trade (39,496) (19,428) (37,510) Accounts receivable - related parties - 50 (48) Other receivables and prepayments 587 (7,988) (262) Inventories 34,557 1,160 (12,814) Advances to suppliers (23,797) (101,731) (10,681) Advances to suppliers-related party - - 9,027 Other current assets (16) (12) 259 Change in operating liabilities Accounts payable, trade 7,390 31,772 27,638 Accrued liabilities (198) 390 (130) Other payables 34 9,789 (1,542) Other payables - related parties - - (235) Customer deposits 997 5,544 2,735 Customer deposits - related parties - - (338) Taxes payable 1,575 5,008 1,604 Net cash (used in) provided by operating (13,887) (58,228) 1,480 activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of subsidiaries, net 18,734 (2,226) - of cash disposed of $3,440 Purchase of equipment and (106) (1,021) (3,564) construction-in-progress Purchase of intangible assets - (2) (6) Proceeds from the disposal of plant and - 2 - equipment and intangible assets Cash received from legal acquirer - - 6 Net cash provided by (used in) investing 18,628 (3,247) (3,564) activities SGOCO GROUP, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 - Continued (In thousands) 2012 2011 2010 CASH FLOWS FROM FINANCING ACTIVITIES: Increase in restricted cash - (19,413) (731) Proceeds from bank overdrafts - 7,304 10,350 Payments on bank overdrafts - (7,539) (9,618) Notes payable - 40,899 6,824 Proceeds from government - - 1,163 Proceeds from short-term loan 6,230 102,258 30,512 Payments on short-term loan - (81,516) (32,056) Shareholder contribution - - 367 Proceeds from shareholder loan - - 2,545 Payments on shareholder loan - (2,336) - Proceeds from recapitalization - - 5,388 Payments of recapitalization cost - - (666) Repayments on shareholder promissory notes - - (100) Proceeds from shares issuance - - 5,595 Payments of financing costs - - (300) Payments on repurchase of shares pursuant to - (2,000) - Put Option Payments on repurchase of warrants - (512) - Shares issued for exercise of over - 373 - allotment related to secondary offering Net cash provided by (used in) financing 6,230 37,518 19,273 activities EFFECT OF EXCHANGE RATE ON CASH 42 998 497 INCREASE (DECREASE) 11,013 (22,959) 17,686 IN CASH CASH, beginning of year 535 23,494 5,808 CASH, end of year 11,548 535 23,494 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest 61 2,074 1,021 Cash paid for income taxes 575 4,051 1,986 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Settlement of consideration receivable – 38,397 8,925 - received in finished goods Settlement of consideration receivable offset against -Purchase deposits to Honesty Group - (1,772) - -Payable to Honesty Group - 10,156 - Consideration receivable from the Sale of - 57,478 - Honesty Group SOURCE SGOCO Group, Ltd. Website: http://public.viavid.com/index.php?id=103940 Website: http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=13 Website: http://www.sgocogroup.com
SGOCO Group, Ltd. Reports Unaudited Financial Results for the Fourth Quarter and Full Year 2012
Press spacebar to pause and continue. Press esc to stop.