China Skyrise Announces Full-Year 2009 Results
Revenue increased 65.6% year-over-year to $6.9 million
SHENZHEN, China, April 1 /PRNewswire-Asia-FirstCall/ -- China Skyrise Digital Service Inc. (OTC Bulletin Board: CSKD) ("China Skyrise" or the "Company") yesterday announced financial results for the year ended December 31, 2009.
Fiscal 2009 Results
Revenue totaled approximately $6.9 million in 2009, a strong increase of 65.6%, versus $4.1 million for 2008. This rapid revenue growth was primarily driven by higher unit sales more than offsetting lower average selling prices.
"We are delighted to see that demand for our digital intercom products and solutions continued to experience robust growth in 2009 despite a challenging business environment," said Mr. Mingchun Zhou, Chairman and Chief Executive Officer of China Skyrise. "Revenues grew 65.6% in 2009, and our market share expanded to 12%. During the year, we earned nearly all of our revenue from digital intercom products and solutions, which we believe serves as an indicator that long-term industry trends are working in our favor. In terms of geographical contribution, we saw strength in the percentage of sales attributable to sales in Guangdong, our home province, which contributed 57.8% to our total sales during the period, compared to 31.3% in the previous year. Our product sales were also strong in Zhejiang, Hubei, and Jiangsu provinces and in Beijing, which together accounted for 32.1% of total sales."
"In September 2009, we went public in the U.S. through a share-exchange transaction, which represented another major milestone for China Skyrise," continued Mr. Zhou. "We are excited to be the one of the first companies in China's digital intercom sector to list publicly on a U.S. stock exchange. We believe that this represents an important step for us as we seek a higher platform to continue our geographic expansion and implement our strategic growth plans."
Cost of goods sold climbed by 157.6% to $4.7 million in 2009, or 68.5% of sales, from $1.8 million, or 44.1% of sales in the prior period. The Company reduced prices to maintain and continue to gain market share as customers became more price-sensitive in the global financial crisis. The cost of goods sold was also negatively affected by a moderate increase in raw materials cost due to an unfavorable supply-demand imbalance. In addition, some software- development cost in 2008 was recorded in cost of goods sold in 2009.
Gross profit for 2009 totaled $2.2 million, or 31.5% of sales, compared with $2.3 million, or 55.9% of sales, for 2008. The decrease in gross margin was largely attributable to a shift in customer demand towards standard products, versus high-end and luxury products, which were stronger in 2009.
Operating expenses totaled approximately $1.3 million for 2009, roughly flat with 2008. Total operating expenses amounted to 19.3% of sales in 2009, compared with 32.0% in 2008. Selling expenses decreased by 2.6% year over year to $0.5 million due to a contracted sales network. General and administrative expenses, though, grew 1.7% year over year to $0.8 million. Research and development expenses increased 8.9% to $418,177 in 2009 (amounting to 6.1% of sales) from $383,952 in 2008 (9.3% of sales), as the Company added more research and development employees.
Operating income was $0.8 million compared to $1.0 million in 2008.
The Company's net income in 2009 was $1.1 million, down 14.4% from $1.2 million in 2008. Earnings per basic and diluted share was $0.05 for 2009, compared to $0.07 for 2008.
Financial Condition
As of December 31, 2009, China Skyrise had $0.4 million in cash and cash equivalents and approximately $3.8 million in working capital. The Company had $0.4 million of short-term debt and no long-term liabilities. As of December 31, 2009, shareholders' equity was $4.4 million.
Business Outlook
China Skyrise maintains a positive outlook for China's security surveillance sector, and management estimates that the market for video surveillance is growing at an annual rate of 15% or greater. Management believes that the Company is well positioned to benefit from the continuing momentum of China's residential real estate industry. In the first quarter alone, the Company began shipping to six new intercom projects in Macau, Taiwan, Haikou (in Hainan Province), Ningbo (in Zhejiang Province) and Hefei (in Anhui Province).
While the Company continues to gain market share with its low-end digital solutions displacing competitors' high-end analog solutions, China Skyrise also stands to benefit from analog-to-digital upgrades of existing residential neighborhoods, a huge market. The Company is also developing a new cost-saving system-on-chip, and has initiated projects with two of China's leading 3G wireless communication service providers to test-launch standalone wireless intercom solutions. Wireless connectivity opens up potential markets for value-added services such as broadband access and home shopping, serving Chinese families. To maintain its technology leadership in the digital intercom segment, China Skyrise plans to maintain a healthy level of R&D investment, with R&D spending expected to grow by 30% annually from 2010 to 2012.
"With continuous product innovation and strong brand recognition, we are optimistic about our financial performance in 2010 and beyond. We believe our current backlog of approximately $2.2 million, together with continuing new business wins will generate revenue of approximately $10.2 million and net income of approximately $1.8 million in 2010," concluded Mr. Zhou.
The Company will continue to enjoy preferential tax treatment for the next three years starting in 2010, with an applicable tax rate of 11%.
About China Skyrise Digital Service Inc.
China Skyrise Digital Service Inc. ("China Skyrise" or the "Company") develops, sells, installs and maintains digital residential and video- surveillance products, as well as related software. The Company's customers are primarily urban and suburban residential communities and real-estate developers in China, and China Skyrise receives the majority of its revenues from packaged digital residential safety and video-surveillance systems. The Company is headquartered in Shenzhen, and its sales network focuses on the heavily populated areas of Guangdong Province. For more information, contact CCG Investor Relations directly or go to China Skyrise's website at http://www.szskyrise.com/ .
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of China Skyrise's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the residential digital safety and surveillance industry, the Company's ability to maintain its competitive position as well as other relevant risks, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. China Skyrise does not assume any obligation to update the information contained in this press release.
For more information, please contact: Company Contact: Dustin Han, Vice President, Investor Relations China Skyrise Digital Service Inc. Email: [email protected] Tel: +1-408-857-8897 Web: http://www.szskyrise.com Investor Relations Contact: John Harmon, Senior Account Manager CCG Investor Relations Email: [email protected] Tel: +1-646-833-3424 Web: http://www.ccgir.com (financial tables follow) CHINA SKYRISE DIGITAL SERVICE INC. CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008 2009 2008 Revenues $6,856,198 $4,140,682 Cost of goods sold 4,698,295 1,824,163 Gross profit 2,157,903 2,316,519 Selling and marketing expenses (532,492) (546,846) General and administrative expenses (792,001) (778,515) Net income from operations 833,410 991,158 Other Income (Expense) Other income 3,672 76,665 Government grant 242,948 201,562 Interest expense (22,638) (39,511) Total Other Income (Expense) 223,982 238,716 Income before provision for income taxes $1,057,392 $1,229,874 Provision for income taxes (4,301) (312) Net income 1,053,091 1,229,562 Other comprehensive income 656 32,682 Foreign currency translation gain -- -- Comprehensive income 1,053,747 1,262,244 Earnings Per Share Basic $0.0541 $0.0723 Diluted $0.0541 $0.0723 Weighted Average Number of Shares Outstanding Basic $19,448,304 $17,004,800 Diluted $19,448,304 $17,004,800 CHINA SKYRISE DIGITAL SERVICE INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2009 AND DECEMBER 31, 2008 2009 2008 ASSETS CURRENT ASSETS Cash and cash equivalents $409,718 $508,272 Accounts receivable, net of allowance for doubtful accounts 3,089,672 2,049,356 Inventory 1,373,733 1,336,615 Deposit and prepaid expense 558,068 313,978 Other receivables 536,013 727,612 Tax recoverable -- 31,132 Total current assets 5,967,204 4,966,965 Property, plant and equipment, net of accumulated depreciation 340,616 188,867 Other assets Intangible assets, net of accumulated amortization 122,650 103,115 Goodwill 193,754 193,754 Total other assets 316,404 296,869 TOTAL ASSETS $6,624,224 $5,452,701 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $1,005,679 $720,400 Unearned Revenue 81,009 58,692 Other payables and accrued expenses 541,767 1,309,071 Short term debt 440,100 623,475 Tax payable 73,160 -- 2,141,715 2,711,638 Commitments and contingencies -- -- SHAREHOLDERS' EQUITY Common stock: 0.001 par value Authorized: 75,000,000 common shares Issued and outstanding: 21,110,550 (2008: 17,004,800) common shares 21,111 17,005 Additional paid-in capital 2,207,072 1,523,479 Statutory reserves 2,791 2,791 Retained earnings 2,218,197 1,165,106 Accumulated other comprehensive income 33,338 32,682 Total shareholders' equity 4,482,509 2,741,063 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,624,224 $5,452,701 CHINA SKYRISE DIGITAL SERVICE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008 2009 2008 Cash flows from operating activities: Net income for the period $1,053,091 $1,229,562 Adjustments to reconcile net loss to net cash from operations: Depreciation 65,896 64,012 Amortization of intangible assets 32,310 23,326 Changes in operating assets and liabilities: Increase in inventory (74,070) (1,336,615) Increase in deposits and prepaid expenses (207,138) (313,978) Increase in accounts receivable (1,040,316) (2,049,356) Decrease (increase) in other receivable 191,599 (727,612) Increase in tax payable 73,160 -- Decrease (increase) in tax recoverable 31,132 (31,132) Increase in accounts payable 285,279 720,400 Increase in unearned revenue 22,317 58,692 Increase in other payable and accruals (767,305) 1,310,403 Net cash generated from (provided by) operating activities (334,045) (1,052,298) Cash flows from investing activities Purchases of property, plant and equipment (217,685) (254,011) Purchases of goodwill -- (193,754) Net payment from acquisition of subsidiary -- 295,395 Purchases of intangible assets (51,864) (126,854) Net cash provided by investing activities (269,549) (279,224) Cash flows from financing activities Proceeds from short term debt 440,100 1,114,920 Repayment of short term debt (623,475) (491,445) Statutory reserve -- 2,791 Capital contributed by stockholders 683,593 1,472,739 Net cash (provided by) generated from financing activities 500,218 2,099,005 Effects of exchange rate changes on cash 4,822 (259,211) (Decrease) increase in cash and cash equivalents (98,554) 508,272 Cash and cash equivalents, beginning of period 508,272 -- Cash and cash equivalents, end of period $409,718 $508,272 Supplementary disclosures of cash flow information: Cash paid for interest $22,638 $39,511 Cash paid for income taxes $4,301 $312 Non cash transaction: shareholder forgiveness of debts $-- $30,365 Common stock issued for services $4,106 $--
SOURCE China Skyrise Digital Service Inc.
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