Hauppauge Digital, Inc. (NASDAQ: HAUP), a leading developer of digital video TV and data broadcast receiver products for personal computers, today reported financial results for the fourth fiscal quarter and year ended September 30, 2007.
FOURTH QUARTER RESULTS
Net sales in the quarter increased 24%, from $22.2 million for the previous year's fourth fiscal quarter to $27.5 million for the fourth fiscal quarter of 2007.
Fiscal 2007 fourth quarter net income was $1,644,263, including a tax benefit of $1,490,689 due to a reduction in the deferred tax asset valuation allowance. Excluding the reduction in the deferred tax asset valuation allowance, the Company recorded net income of $153,574 for the fourth quarter of fiscal 2007, compared to net income of $50,920 for the fourth quarter of fiscal 2006, an increase of approximately 202%. Net income per share for the fourth quarter of fiscal 2007, including the reduction in the deferred tax asset valuation allowance, was $0.17 and $0.16 on a basic and diluted basis. Net income per share, excluding the reduction in the deferred tax asset valuation allowance, was $0.02 on a basic and diluted basis for the fourth quarter of fiscal 2007 compared to net income per share of $0.01 on a basic and diluted basis for the prior year's fourth fiscal quarter.
FISCAL YEAR RESULTS
Net sales for the year increased 14%, from $97.7 million for the 2006 fiscal year to $110.9 million for the 2007 fiscal year.
Fiscal 2007 net income was $5,305,284, including a tax benefit of $1,490,689 due to a reduction in the deferred tax asset valuation allowance. Excluding the reduction in the deferred tax asset valuation allowance, the Company recorded net income $3,814,695 for fiscal 2007, compared to net income of $2,409,612 for fiscal 2006, an increase of approximately 58%. Net income per share for fiscal 2007, including the reduction in the deferred tax asset valuation allowance, was $0.54 and $0.51 on a basic and diluted basis. Net income per share, excluding the reduction in the deferred tax asset valuation allowance, was $0.39 and $0.37 on a basic and diluted basis for fiscal 2007 compared to net income per share of $0.25 and $0.24 on a basic and diluted basis for fiscal 2006.
DISCUSSION OF RESULTS
Ken Plotkin, Hauppauge's Chief Executive Officer, stated, "In 2007, we saw a rapid switch in market demand from our mainstream WinTV-PVR analog TV receivers to our newer digital WinTV-HVR products. In 2006, the WinTV-PVR product line accounted for over 65% of our sales. But in 2007, the WinTV-PVR products dropped to only 10% of sales. In North America, this change in demand was due primarily to the U.S. F.C.C. imposed discontinuation of analog TV receivers, while in Europe, the rapid switch to digital receivers was a natural result of the fact that, by 2007, most countries had started digital TV broadcasts.
"Though the speed of this shift to our new WinTV-HVR digital products was unexpected, our sales and production team did an excellent job in making this product transition smooth.
"Though the start was slow, over the course of the year, Hauppauge saw a growing acceptance of Microsoft's new Vista operating system. The Company put more of it's U.S. and Taiwan engineering resources into developing products which make use of Vista's TV watching and recording capabilities. During fiscal 2007, we introduced seven new products, the WinTV-HVR-1250, WinTV-HVR1500, WinTV-HVR-1600 and WinTV-HVR1800 for the North American market, and the WinTV-HVR-1200, WinTV-HVR-1400 and WinTV-HVR-1750 for the European market. All of these products are Microsoft Premium certified to run under the Microsoft Vista operating system.
"The combination of the sales growth of our WinTV products for Vista, coupled with a modest increase in our expenses, resulted in operating income for the year increasing 58%."
Mr Plotkin also noted that, in the third and fourth quarters of fiscal 2007, the Company purchased 142,032 of Company shares on the open market, pursuant to its stock repurchase plan.
ABOUT HAUPPAUGE DIGITAL
Hauppauge Digital, Inc. is a leading developer of analog and digital TV receiver products for the personal computer market. Through its Hauppauge Computer Works, Inc. and Hauppauge Digital Europe subsidiaries, the Company designs and develops analog and digital TV receivers that allow PC users to watch television on their PC screen in a resizable window and enable the recording of TV shows to a hard disk, digital video editing, video conferencing, receiving of digital TV transmissions, and the display of digital media stored on a computer to a TV set via a home network. The Company is headquartered in Hauppauge, New York, with administrative offices in Luxembourg, Ireland and Singapore and sales offices in Germany, London, Paris, The Netherlands, Sweden, Italy, Spain, Singapore, Taiwan and California. The Company's Internet web site can be found at http://www.hauppauge.com.
This press release contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this press release may not occur. Generally these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words "may," "will," "expect," "believe," "anticipate," "project," "plan," "intend," "estimate," and "continue," and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences (including, but not limited to, those set forth in our public reports filed with the Securities and Exchange Commission including, but not limited to, our Annual Report on Form 10-K for the year ended September 30, 2006, our Form 10-Q for the quarters ended December 31, 2006, March 31, 2007, and June 30, 2007, and our Form 10-K for the year ended September 30, 2007 to be filed with the Securities and Exchange Commission) many of which are beyond our control, that may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
 HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME | ||||||
 | ||||||
 |  | Three months ended September 30, | ||||
 | 2007 |  |  | 2006 | ||
 | ||||||
Net sales | $ | 27,544,887 | $ | 22,155,951 | ||
Cost of sales | Â | 22,369,855 | Â | Â | 17,356,169 | |
Gross profit | 5,175,032 | 4,799,782 | ||||
Selling, general and administrative expenses | 3,799,060 | 3,843,242 | ||||
Research & development Expenses | Â | 1,100,048 | Â | Â | 882,378 | |
Income from operations | 275,924 | 74,162 | ||||
Other income (expense): | ||||||
Interest income | 11,147 | 10,501 | ||||
Foreign currency | Â | (25,420) | Â | Â | 9,987 | |
Total other income (expense) | Â | (14,273) | Â | Â | 20,488 | |
Income before taxes (benefit) on income | 261,651 | 94,650 | ||||
Income tax provision | 108,077 | 43,730 | ||||
Income tax (benefit) (1) | Â | (1,490,689) | Â | Â | - | |
Net income | $ | 1,644,263 | Â | $ | 50,920 | |
 | ||||||
Net income per share-basic | $ | 0.17 | $ | 0.01 | ||
Net income per share-diluted | $ | 0.16 | Â | $ | 0.01 | |
 |  |  | ||||
Weighted average shares-basic | 9,919,292 | 9,650,784 | ||||
Weighted average shares-diluted | 10,232,013 | 10,092,939 | ||||
(1) Tax benefit is due to a reduction in the deferred tax asset valuation allowance |
 HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME | ||||||
 | ||||||
 | Twelve months ended September 30, | |||||
 | 2007 |  |  | 2006 | ||
 | ||||||
Net sales | $ | 110,896,010 | $ | 97,662,326 | ||
Cost of sales | Â | 88,651,881 | Â | Â | 77,817,275 | |
Gross profit | 22,244,129 | 19,845,051 | ||||
Selling, general and administrative expenses | 14,667,766 | 14,115,989 | ||||
Research & development expenses | Â | 3,480,017 | Â | Â | 3,164,924 | |
Income from operations | 4,096,346 | 2,564,138 | ||||
Other income (expense): | ||||||
Interest income | 43,135 | 28,422 | ||||
Foreign currency | Â | (31,676) | Â | Â | 7,292 | |
Other income (expense) | Â | 11,459 | Â | Â | 35,714 | |
Income before taxes (benefit) on income | 4,107,805 | 2,599,852 | ||||
Income tax provision | 293,110 | 190,240 | ||||
Income tax (benefit) (1) | Â | (1,490,689) | Â | Â | - | |
Net income | $ | 5,305,384 | Â | $ | 2,409,612 | |
 | ||||||
Net income per share-basic and diluted | $ | 0.54 | $ | 0.25 | ||
Net income per share-diluted | $ | 0.51 | Â | $ | 0.24 | |
 |  |  | ||||
Weighted average shares-basic | 9,862,655 | 9,593,050 | ||||
Weighted average shares-diluted | 10,367,775 | 10,019,514 | ||||
 | ||||||
(1) Tax benefit is due to a reduction in the deferred tax asset valuation allowance |
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES | Â | |||||
CONSOLIDATED BALANCE SHEETS | ||||||
 | ||||||
 |  | |||||
September 30, 2007 | Â | September 30, 2006 | ||||
Assets: | ||||||
 | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 11,581,657 | $ | 9,020,941 | ||
Accounts receivables, net of various allowances | 23,667,826 | 16,132,928 | ||||
Inventories | 13,521,864 | 9,905,746 | ||||
Deferred tax asset current | 603,078 | - | ||||
Prepaid expenses and other current assets | Â | 802,575 | Â | Â | 895,223 | |
Total current assets | 50,177,000 | 35,954,838 | ||||
 | ||||||
Property, plant and equipment, net | 745,121 | 612,311 | ||||
Security deposits and other non current assets | 110,165 | 83,239 | ||||
Deferred tax asset non current | Â | 887,611 | Â | Â | - | |
$ | 51,919,897 | Â | $ | 36,650,388 | ||
 |  |  | ||||
Liabilities and Stockholders' Equity : | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | 20,635,137 | $ | 12,011,232 | ||
Accrued expenses -fees | 5,827,356 | 5,481,005 | ||||
Accrued expenses | 2,374,410 | 1,174,323 | ||||
Income taxes payable | Â | 141,913 | Â | Â | 204,103 | |
Total current liabilities | 28,978,816 | 18,870,663 | ||||
Stockholders' Equity | ||||||
Common stock $.01 par value; 25,000,000 shares authorized | ||||||
10,597,002 and 10,260,464 issued, respectively | 105,970 | 102,605 | ||||
Additional paid-in capital | 15,497,703 | 14,222,890 | ||||
Retained earnings | 11,026,884 | 5,721,500 | ||||
Accumulated other comprehensive income | (1,325,971) | (509,319) | ||||
Treasury Stock, at cost, 749,579 and 607,547shares, respectively | Â | (2,363,505) | Â | Â | (1,757,951) | |
Total stockholders' equity | Â | 22,941,081 | Â | Â | 17,779,725 | |
$ | 51,919,897 | Â | $ | 36,650,388 |