Strong Growth Exhibited, Q1 Revenue Increases 445% to $2.6 Million, Q1 Net Income of $0.5 Million Compared to Net Loss in Q1 2008
NEW YORK and SHENZHEN, China, May 12 /PRNewswire-Asia-FirstCall/ -- China Digital Communication Group (BULLETIN BOARD: CHID) , a manufacturer of battery components in China, announced today its financial results for the three months ended March 31, 2009.
First Quarter Highlights - Revenue was $2.6 million, an increase of 445% from $0.5 million in 2008 - Gross profit was $0.7 million, compared to $(51,000) in 2008 - Net income was $0.5 million, compared to $(0.2) million in 2008 - Basic and fully diluted earnings per share increased to $0.01 from $(0.00) in 2008 First Quarter 2009 Results
"Compared to last year, we are quite pleased with China Digital's results for the first quarter of 2009. The strong growth in our revenue and net income was the result of the contribution of the new battery distribution business which commenced in the third quarter of 2008 as well as sales increases among our existing customers," said Mr. Fushun Li, China Digital's newly appointed Chief Executive Officer. "We have added additional capacity in our battery shell and cover segment, enabling CHID to serve China's expanding demand for electronic components and 3C related products."
China Digital's net revenue in the first quarter of 2009 was $2.6 million, an increase of 445% from $0.5 million in the first quarter of 2008. Net revenue increased primary due to CHID's entrance into a new business segment as a distributor of batteries during the third quarter of 2008. A contributing factor was the increase of sales in the Company's existing battery shell and cover business.
Sales for the new battery distribution segment were $1.8 million, or 67% of the Company's net revenue in the first quarter of 2009. Sales of the Company's existing battery shell and cover business segment were $0.9 million in the first quarter of 2009, representing a 78% increase from sales of $0.5 million in the first quarter of 2008. This increase is primarily attributed to the general increase in sales to our existing customers.
Gross profit in the first quarter of 2009 was $0.7 million, compared with a gross loss of $(51,000) in the first quarter of 2008. Gross profit margin was 27% in the first quarter of 2009. The improvement in gross profit margin was primarily due to the Company's new battery distribution segment. Compared to the existing battery shell and cover business, the battery distribution segment generates higher profit due to the relative lower cost of sales.
Operating expenses in the first quarter of 2009 were $119,000, compared to $139,000 in the first quarter of 2008. This decrease was primarily due to a decrease in professional fees.
Income from operations in the first quarter of 2009 was $0.6 million, compared with $(0.2) million in the first quarter of 2008. Operating margin was 23% in the first quarter of 2009, compared to a loss from operations of $(0.2) million in the first quarter of 2008.
Income taxes were $62,000 compared to $0 in the first quarter of 2008. The Company's effective tax rate was 11% compared to 0%, due to the fact that there was no income in the first quarter of 2008.
Net income was $0.5 million in the first quarter of 2009, compared to a net loss of $(0.2) million in the first quarter of 2008. Basic and diluted earnings per share were $0.01 for the first quarter of 2009, compared to $(0.00) in the first quarter of 2008.
Financial Condition
As of March 31, 2009, China Digital had cash and cash equivalents of $10.2 million and working capital of $9.5 million. Loan payables totaled $2.2 million and shareholders' equity was $11.1 million. During the three months ended March 31, 2009, net cash provided by operating activities was $3.2 million and was primarily from account receivables.
Recent Developments
On May 4, 2009, China Digital filed an information statement to inform its shareholders of a pending "10 to 1" reverse split. The action was approved by the Board of Directors of China Digital on April 30, 2009 and China Digital anticipates an effective date of June 5, 2009.
On May 11, 2009, China Digital announced the appointment of its new CEO and director, Mr. Fushun Li, who brings a wealth of experience as an industry veteran of China's electronic manufacturing industry.
Mr. Li was formerly the founder and president of Shenzhen Kai Bi Te Tech. Co., Ltd, an electronic components and 3C electronic products manufacturer that reached revenues in excess of 1 billion RMB under his leadership. Mr. Li's background spans more than 20 years in various executive roles at equipment manufacturers and electronic companies in Shenzhen and Guangzhou.
Business Outlook
"Considering the global economic downturn, we believed that our performance for the first quarter in 2009 demonstrates the strong growth potential of our business model and the insatiable demand for batteries in our consumer-electronic driven culture," said Mr. Li. "With the addition of our new battery selling business, which complements our existing shell and cover production, we remain confident that our growth will handsomely exceed 2008 performance for the remainder of 2009 and beyond."
About China Digital Communication Group:
China Digital Communication Group, through its wholly owned subsidiary, Shenzhen E'Jenie Science and Technology Co., Ltd. (E'Jenie), is one of China's leading manufacturers and developers of advanced telecommunications equipment. E'Jenie sells advanced high-quality lithium-ion battery shell and cap products to all major lithium-ion battery cell manufacturers in China. E'Jenie's products are used to power mobile phones, MP3 players, laptops, digital cameras, PDAs, camera recorders and other consumer electronic digital devices. China Digital Communication Group is continuing its expansion across East Asia, while seeking distribution partners and acquisitions in new global markets, including the U.S.
For more information, please visit: http://www.chinadigitalcommunication.com/
Forward-looking statement:
Except for the historical information, the matters discussed in this news release may contain forward-looking statements, including, but not limited to, factors relating to future sales. These forward-looking statements may involve a number of risks and uncertainties. Actual results may differ materially based on a number of factors, including, but not limited to, uncertainties in product demand, risks related to doing business in China, the impact of competitive products and pricing, changing economic conditions around the world, release and sales of new products and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission.
China Digital Communication Group and Subsidiaries Selected Consolidated Statements of Operations (in millions, except per share amounts) (unaudited) Three months ended March 31, 2009 2008 Revenue $ 2.6 $ 0.5 Cost of revenue 1.9 0.5 Selling, general and admin expenses 0.1 0.1 Income from operations 0.6 (0.2) Interest expense and other (0.03) (0.03) Provision for income taxes (0.06) -- Net income(loss) $ 0.5 $ (0.2) Basic and diluted earnings per share $ 0.01 $ (0.00) Basic weighted average shares 54.5 54.5 Diluted weighted average shares 54.5 54.5 NOTE: The above numbers may not total correctly due to rounding. China Digital Communication Group and Subsidiaries Selected Consolidated Balance Sheet Items (in millions) (unaudited) March 31, December 31, 2009 2008 Cash and cash equivalents $ 10.2 $ 7.0 Accounts receivable, net 2.7 7.4 Inventories 0.3 0.8 Property, plant & equipment, net 0.8 0.9 Intangible assets, net 0.9 0.9 Total current liabilities 3.7 6.2 Total stockholders' equity $ 11.1 $ 10.6 NOTE: The above numbers may not total correctly due to rounding. China Digital Communication Group and Subsidiaries Selected Consolidated Cash Flow Items (in millions) (unaudited) Three months ended March 31, 2009 2008 Net cash provided (used) by operating $ $ activities 3.2 (0.0) Net cash provided by financing activities 0.0 (0.3) Effective exchange rate changes (0.0) 0.1 Net change in cash and cash equivalents $ 3.2 $ (0.2) NOTE: The above numbers may not total correctly due to rounding. China Digital Communication Group And Subsidiaries Selected Segment Information (in millions) Unaudited Three months ended March 31, 2009 2008 Revenues from unaffiliated customers: Battery shell and cover $ 0.9 $ 0.5 Battery 1.8 -- Consolidated $ 2.6 $ 0.5 Income (loss) from operation: Battery shell and cover $ 0.1 $ (0.1) Battery 0.6 -- Corporation (0.1) (0.1) Consolidated $ 0.6 $ (0.2) NOTE: The above numbers may not total correctly due to rounding. For more information, please contact: China Digital Communication Group Ken Lin Tel: +1-917-573-0302 Email: ken@chinadigitalcommunication.com China America Financial Communications Group Darren Minton Tel: +1-212-823-0523 Email: chinadigital@cafcg.com
China Digital Communication Group
CONTACT: China Digital Communication Group, Ken Lin, +1-917-573-0302,
ken@chinadigitalcommunication.com or China America Financial Communications
Group, Darren Minton, +1-212-823-0523, chinadigital@cafcg.com, for China
Digital Communication Group
Web site: http://www.chinadigitalcommunication.com/
