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Automotive Intelligence - the web for automotive professionals and car enthusiasts |
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August 12, 2010 This Week:
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Second Quarter and Six Months 2010 Financial Results Revenues Total revenue for the second quarter 2010 increased year-over-year by 13.3% to $25.3 million, due to increased sales of the Company's higher-priced products, including the numerical control motor products. 60.7% of second quarter 2010 revenue was from OEM customers, versus 42.7% in the same period last year. As a percentage of total revenue, sales of the Home Appliance, Auto Part and Digital Motor product series in the second quarter of 2010 were 68.9%, 19.3% and 11.8%, respectively, compared to 70.0%, 17.6% and 12.4%, respectively, in the second quarter of 2009. Roughly 65.2% of second quarter 2010 sales were to customers in China, versus 63.9% in the same period last year. Total revenue for the six months ended June 30, 2010 increased year-over-year by 13.6% to $46.8 million. 62.7% of first half 2010 revenue was from OEM customers, versus 48.0% in the same period last year. As a percentage of total revenue, sales of the Home Appliance, Auto Part and Digital Motor product series in the first six months of 2010 were 68.1%, 20.1% and 11.8%, respectively, compared to 68.8%, 19.4% and 11.8%, respectively, in the first six months of 2009. Roughly 65.5% of first half sales were to customers in China, versus 59.4% in the same period last year. Cost of Goods Sold Cost of goods sold in the second quarter 2010 increased year-over-year by 9.8% to $17.9 million. The change in cost of goods sold was driven primarily by an increase in the prices of raw materials, particularly lacquered wire, and an increase in the Company's sales of higher-priced products. Cost of goods sold in the six months ended June 30, 2010 increased year-over-year by 11.3% to $33.2 million. Gross Profit and Gross Margin Gross profit for the second quarter of 2010 increased year-over-year by 22.9% to $7.4 million versus $6.0 million in the same period last year. Gross margin for the second quarter 2010 was 29.1%, up from 26.9% in the second quarter 2009. The improved gross margin versus last quarter was due to an increase in sales of the Company's micro-motor products. Gross profit for the first six months of 2010 increased year-over-year by 19.7% to $13.6 million versus $11.3 million in the same period last year. Gross margin for the first six months of 2010 was 29.0%, up from 27.5% the first six months of 2009. Operating Expenses Research and development ("R&D") expenses for the second quarter 2010 increased year-over-year by 9.5% to $0.5 million, or 1.8% of total revenue, compared to $0.4 million, or 1.9% of total revenue, in the comparable period in 2009. The R&D expenses in the second quarter were focused on new product initiatives. Selling expenses for the second quarter 2010 decreased year-over-year by 12.6% to $1.0 million, compared to $1.2 million in the second quarter 2009. The change was primarily a result of increased sales efficiency. As a percentage of total revenue, second quarter 2010 selling expenses decreased to 4.0%, compared to 5.2% in the second quarter 2009. Total general and administrative ("G&A") expenses for the second quarter 2010 decreased year-over-year to $1.1 million, compared to $1.9 million in the second quarter 2009. As a percentage of total revenue, second quarter 2010 total G&A expenses were 4.3%, versus 8.6% in the second quarter of 2009. The decrease is largely because the Company incurred a merger expense of $0.9 million in the second quarter of 2009 related to the share exchange transaction which closed on May 6, 2009. There were no merger costs incurred in 2010. Accordingly, total operating expenses for the second quarter 2010 decreased year-over-year by 32.2%, to $2.1 million. Research and development ("R&D") expenses for the first six months of 2010 increased year-over-year by 7.6% to $0.8 million, or 1.8% of total revenue, compared to $0.8 million, or 1.9% of total revenue, in the comparable period in 2009. Selling expenses for the first six months of 2010 decreased year-over-year by 4.5% to $1.9 million, compared to $2.0 million in the first six months of 2009. As a percentage of total revenue, first half 2010 selling expenses decreased to 4.2%, compared to 5.0% in the first half of 2009. Total general and administrative ("G&A") expenses for the first six months of 2010 decreased year-over-year to $2.4 million, compared to $2.6 million in the first six months of 2009. As a percentage of total revenue, first half 2010 total G&A expenses decreased to 5.2% from 6.3% in the second quarter of 2009. Accordingly, total operating expenses for the first six months of 2010 decreased year-over-year by 5.6%, to $4.4 million. Earnings Operating income for the second quarter 2010 was $5.3 million, compared to $2.9 million in the second quarter of 2009. Net income in the second quarter 2010 was $4.1 million, an increase of 93.2% compared to a net income of $2.1 million for the second quarter of 2009. Basic and diluted earnings per share for the second quarter 2010 were $0.20, based on 20,744,743 and 20,832,957 weighted average shares outstanding, respectively, versus basic earnings per share of $0.18 and diluted earnings per share of $0.17 in the second quarter of 2009, based on 12,125,842 and 12,510,623 weighted average shares outstanding, respectively. Operating income for the first six months of 2010 was $9.2 million, compared to $6.7 million in the first six months of 2009. Net income in the first six months of 2010 was $7.1 million, an increase of 37.7% compared to a net income of $5.1 million for the first six months of 2009. Basic earnings per share for the first six months of 2010 were $0.37, based on 19,378,648 weighted average shares outstanding, and diluted earnings per share for the first six months of 2010 were $0.36, based on 19,420,586 weighted average shares outstanding, versus basic and diluted earnings per share of $0.44 in the first six months of 2009, based on 11,600,470 and 11,794,426 weighted average shares outstanding, respectively. Balance Sheet Cash and cash equivalents were $37.9 million as of June 30, 2010, compared to $10.6 million as of December 31, 2009, primarily attributable to the increase of funds from the Company's private placement and public offering. Total accounts receivable as of June 30, 2010 were $9.9 million, compared to $8.5 million as of December 31, 2009. Inventories as of June 30, 2010 amounted to $6.1 million, compared to $7.2 million as of December 31, 2009. Guidance for Third Quarter and Fiscal Year 2010 As of August 5, 2010, the Company reports that there are approximately 2.65 million motor units in the backlog, approximately 1.8 million of which are AC motor units used mainly for home appliances, with an average selling price of $4.40; approximately 650,000 of which are DC motor units used mainly for cell phones and remote controlled toys, with an average selling price of $0.36; and approximately 200,000 of which are DC motor units used mainly for auto parts, with an average selling price of $4.10. Backlog is subject to change by reason of several factors, including possible cancellation and change of orders, terms of the purchase orders and other factors beyond the Company's control. Accordingly, backlog is not necessarily indicative of the revenues or any profits which may be realized when the results of such purchase orders are reported. Management estimates that revenue for the third quarter of 2010 will be in the range of $30.0 million to $31.5 million. Management expects net income for the third quarter of 2010 to be in the range of $4.3 million to $4.725 million. Management estimates that basic and diluted earnings per share for the third quarter of 2010 will be between $0.20 and $0.22, based on 21,409,960 shares outstanding on a fully diluted basis. Management confirms that it expects revenue for fiscal year 2010 to be in the range of $110 million to $120 million and now expects net income for fiscal 2010 to be in the range of $17.2 million and $18.5 million, primarily due to a delay in the government approval of the Company's tax reduction application in 2010. The Company is constructing new production equipment, which management believes should be capable of producing up to approximately 24 million units of AC and DC motors annually at full capacity. The Company is also installing new production lines for new products. The first new product, which is expected to be launched in the third quarter of 2010, is a coreless motor for use in cell phones and remote control toys. Two new production lines of coreless motors and two lines of AC motors have already been installed, and pilot runs are underway. Management expects these four lines to begin production in August 2010. In July 2010, the Company leased a new factory in Zhejiang, the second biggest micro motor manufacturing hub in China. Four AC motor production lines will be installed in the new Zhejiang factory, with a total annual capacity of approximately 14.4 million units. Two of these new lines are expected to be ready for production in the first week of September 2010 and the others are expected to begin production in November 2010. Two additional new lines for production of coreless motor units are expected to be installed in September 2010 and production is expected to begin in October 2010. Following completion of these new production lines, the Company will have approximately 21.6 million units of new capacity for AC motors and approximately 43.2 million units of new capacity for coreless motors. (Aug 6, 2010)
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