Zungui Haixi Corporation (TSX VENTURE:ZUN), a China-based manufacturer of
sportswear and casual footwear, today announced its financial results for the
fourth quarter and year ended June 30, 2010. All amounts in this release are in
Canadian dollars unless otherwise indicated.
"Our fourth quarter and fiscal year 2010 results reflect strong growth in both
our revenue and net income," indicated Mr. Yanda Cai, Chief Executive Officer.
"Our financial results continue to demonstrate consistent performance and we are
pleased to have this opportunity to update shareholders on our progress."
"We have seen further growth in the number of retail outlets with 1,931 retail
outlets in the network as at September 30, 2010 comparing to 1,682 retail
outlets when we went public in December, 2009. During the last year, we have
produced over 11 million pairs of shoes from both internal and outsourced
manufacturing capacity, a 38% increase over the prior year. We are pleased by
the performance of Mr. Li since his appointment as Chief Operating Officer."
Mr. Yanda Cai further continued, "we are reviewing our brand positioning to
continue to keep pace with the changes in fashion trends and will launch a new
brand strategy for our sports shoes in November. In conjunction with this, we
will launch a more expansive advertising campaign developed with external
support and disburse more of the funds raised during the initial public
offering."
Highlights for the Fourth Quarter and Year:
-- Revenue increased 14% to $50.6 million for the quarter and 18% to $163.9
million for the year;
-- In RMB, revenue increased 31% to RMB 335.8 million for the quarter and
30% to RMB 1,061.3 million for the year ended June 30, 2010;
-- Gross margin of 28.4% for the fourth quarter and 27.2% for the year
ended June 30, 2010 compared to 27.1% and 26.9% for the comparative
periods of 2009, respectively;
-- Net income increased 12% to $8.6 million for the quarter and 17% to
$27.0 million for the year ended June 30, 2010;
-- Net income increased 27% to RMB 57.0 million for the quarter and 29% to
RMB 174.6 million for the year ended June 30, 2010;
-- Diluted earnings per share of 14 cents compared to 15 cents for the same
quarter last year based on a 25% increase in the weighted average number
of shares outstanding in the period; and,
-- Diluted earnings per share increased 4% to 48 cents for the year
compared to 46 cents for the last year on a 13% increase in the weighted
average number of shares outstanding in the period.
The results were impacted by the movement of the Chinese currency relative to
the Canadian dollar. During the fourth quarter ended June 30, 2010 the average
foreign exchange rate used to convert one Chinese Renminbi ("RMB") was 0.1506
expressed in Canadian dollars compared to 0.1707 for the same quarter of 2009.
If the 2010 fourth quarter results were converted at the prior year's average
exchange rate for the quarter, 2010 fourth quarter earnings per share would have
been 16 cents. For the year end June 30, 2010, the average foreign exchange rate
used to convert one RMB was 0.1545 expressed in Canadian dollars compared to
0.1698 for the same period last year. If the fiscal year 2010 results were
converted at the prior year's average exchange rate for 2009, 2010 full year
earnings per share would have been 53 cents, resulting in a 14% increase in
earnings per share.
Audited Consolidated Financial Statements and Management's Discussion and Analysis
The Company's audited consolidated financial statements for the year ended June
30, 2010 and Management's Discussion and Analysis for the same period can be
found on the Company's website at www.zunguihaixi.com and www.sedar.com.
Conference Call
Zungui will host a conference call to discuss the fourth quarter results at 9am
(EDT) September 30, 2010. The details are as follows:
Dial-in number: 1-800-446-4472 or 416-695-7848
Taped rebroadcast (until midnight on
October 14, 2010): 1-800-408-3053
Taped replay access passcode: 1754237
About Zungui Haixi
Zungui Haixi Corporation, through its wholly owned subsidiaries, is engaged in
the manufacture and sale of athletic footwear, apparel and accessories, and also
casual footwear, in the People's Republic of China. Both product lines are
marketed under the ZUNGUI brand. Zungui Haixi distributes its products to
consumers throughout China through an extensive network of retail outlets which
exclusively carry ZUNGUI branded products. There are 62,259,500 common shares
issued and outstanding. The corporate website is www.zunguihaixi.com.
Caution Regarding Forward-Looking Statements
Certain statements in this press release contain forward-looking information
that involve risk and uncertainties. Statements other than statements of
historical fact contained in this press release may be forward-looking
statements within the meaning of certain securities laws, including, without
limitation, statements involving management's expectations, intentions and
beliefs concerning the domestic PRC sportswear industry, the competitive
landscape in this industry and the general economy, statements regarding the
future financial position or results of the Company, business strategies,
proposed acquisitions, growth opportunities, budgets, litigation, projected
costs and plans and objectives of or involving the Company. Such statements
should be considered forward-looking statements, Wherever possible, words such
as "may", "would", "could", "will", "anticipate", "believe", "plan", "expect",
"intend", "estimate", "aim", "endeavour", "project", "continue" and similar
expressions have been used to identify forward-looking statements.
These forward-looking statements reflect management's current beliefs and
business judgement with respect to future events and are based on information
currently available to management. Forward-looking statements involve
significant known and unknown risks, uncertainties and assumptions, and you
should not place undue reliance on these forward-looking statements. Although
management believes its current beliefs and assumptions are reasonable, many
factors could cause Zungui's actual results, performance or achievements to be
materially different from any future results, performance or achievements that
may be expressed or implied by such forward-looking statements, including,
without limitation, those listed in the "Risk Factors" section of the Company's
other filings with Canadian securities regulatory authorities at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should
assumptions underlying the forward-looking statements prove incorrect, actual
results, performance or achievements could vary materially from those expressed
or implied by the forward-looking statements contained in this press release.
The forward-looking statements contained in this press release are expressly
qualified in their entirety by this cautionary statement. These forward-looking
statements are made as of and speak as of the date of this press release and the
Company does not intend to, or assume any obligation to, update or revise these
forward-looking statements to reflect new information, events, results or
circumstances or otherwise after the date on which such statement is made as to
reflect the occurrence of unanticipated events, except as required by law,
including securities laws.
Zungui Haixi Corporation
Consolidated Balance Sheets
(Expressed in thousands of Canadian Dollars)
June 30, 2010 June 30, 2009
------------------------------
Current assets
Cash $ 85,876 $ 23,757
Accounts receivable, net 34,128 22,202
Prepaid expenses 343 510
Inventories 3,498 2,984
Other receivables 1,331 1,234
Future income taxes 58 61
------------------------------
Total current assets 125,234 50,748
Property, plant and equipment 6,470 5,331
------------------------------
Total assets $ 131,705 $ 56,079
------------------------------
------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 30,288 $ 15,624
Bank loan - 511
Taxes payable 4,974 4,287
Due to related party 440 482
------------------------------
Total current liabilities 35,702 20,904
Shareholders' equity
Share capital 33,451 -
Paid-in capital - -
Contributed surplus 3,282 1,174
Surplus reserve funds 4,774 1,938
Retained earnings 56,161 32,021
Accumulated other comprehensive income (loss) (1,665) 42
------------------------------
Total shareholders' equity 96,003 35,175
------------------------------
Total liabilities and shareholders' equity $ 131,705 $ 56,079
------------------------------
------------------------------
Zungui Haixi Corporation
Consolidated Statements of Income and Comprehensive Income
(Expressed in thousands of Canadian Dollars, except per share data)
Three Months Ended Year Ended
June 30, June 30,
2010 2009 2010 2009
---------------------------------------------------
Revenue $ 50,553 $ 44,349 $ 163,885 $ 138,730
Cost of sales 36,187 32,316 119,373 101,323
---------------------------------------------------
Gross profit 14,366 12,033 44,512 37,407
---------------------------------------------------
---------------------------------------------------
Selling expenses 762 725 2,325 3,234
Research and development
expenses 223 166 761 484
General and
administrative expenses 1,309 741 3,705 2,135
Foreign exchange loss 198 - 198 -
Other income, net (84) (19) (100) (52)
---------------------------------------------------
2,408 1,613 6,889 5,801
---------------------------------------------------
Income before income
taxes 11,958 10,420 37,623 31,606
Income tax expense 3,383 2,823 10,647 8,559
---------------------------------------------------
Net income 8,575 7,597 26,976 23,047
---------------------------------------------------
---------------------------------------------------
Other comprehensive
income (loss):
Unrealized gain (loss) on
foreign currency
translation of self-
sustaining operations 4,259 (2,415) (1,707) 1,654
---------------------------------------------------
---------------------------------------------------
Comprehensive income $ 12,834 $ 5,182 $ 25,269 $ 24,701
---------------------------------------------------
---------------------------------------------------
Basic and diluted
earnings per share $ 0.14 $ 0.15 $ 0.48 $ 0.46
---------------------------------------------------
Weighted average number
of shares outstanding 62,259,500 50,000,000 56,403,055 50,000,000
---------------------------------------------------
---------------------------------------------------
Zungui Haixi Corporation
Consolidated Statements of Shareholders' Equity
(Expressed in thousands of Canadian Dollars)
Three months ended Year ended
June 30, June 30,
2010 2009 2010 2009
-------------------------------------------
Share Capital
Balance, beginning of period $ 33,451 $ - $ - $ -
Issuance of share capital - - 35,318 -
Stock based compensation expense - - (1,867) -
-------------------------------------------
Balance, end of period $ 33,451 $ - $ 33,451 $ -
Paid-in Capital
Balance, beginning of period $ - $ 1,174 $ - $ 1,174
Reorganization of capital - (1,174) - (1,174)
-------------------------------------------
Balance, end of period $ - $ - $ - $ -
Contributed Surplus
Balance, beginning of period $ 3,168 $ 1,174 $ 1,174 $ -
Reorganization of capital - - - 1,174
Stock based compensation expense 114 - 2,108 -
-------------------------------------------
Balance, end of period $ 3,282 $ 1,174 $ 3,282 $ 1,174
Retained Earnings
Balance, beginning of period $ 50,422 $ 24,424 $ 32,021 $ 8,974
Net income 8,575 7,597 26,976 23,047
Transfer to surplus reserve funds (2,836) - (2,836) -
-------------------------------------------
Balance, end of period $ 56,161 $ 32,021 $ 56,161 $ 32,021
Surplus Reserve Fund
Balance, beginning of period $ 1,938 $ 1,938 $ 1,938 $ 1,938
Transfer from retained earnings 2,836 - 2,836 -
-------------------------------------------
Balance, end of period $ 4,774 $ 1,938 $ 4,774 $ 1,938
Accumulated Other Comprehensive
Income
Balance, beginning of period $ (5,924) $ 2,457 $ 42 $ (1,612)
Other comprehensive income (loss) 4,259 (2,415) (1,707) 1,654
-------------------------------------------
Balance, end of period $ (1,665) $ 42 $ (1,665) $ 42
Total Shareholders' Equity $ 96,003 $ 35,175 $ 96,003 $ 35,175
-------------------------------------------
-------------------------------------------
Zungui Haixi Corporation
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian Dollars)
For the Three Months For the Year Ended
Ended June 30, June 30,
2010 2009 2010 2009
-------------------------------------------
Cash flows from operating
activities
Net income $ 8,575 $ 7,597 $ 26,976 $ 23,047
Items not affecting cash:
Depreciation 261 121 601 487
Future income taxes 8 (22) (2) (30)
Provision for doubtful accounts 99 75 144 111
Stock based compensation 114 - 242 -
Loss on disposal of property,
plant and equipment 33 - 33 -
Changes in non-cash working
capital
Accounts receivable (8,951) (7,809) (13,702) (9,433)
Prepaid expenses 126 63 123 (285)
Inventories 1,496 2,009 (747) (638)
Other receivables (77) (39) (195) (154)
Accounts payable and accrued
liabilities 13,066 674 15,689 3,502
Taxes payable 1,483 1,328 1,121 798
-------------------------------------------
Net cash provided by operating
activities 16,233 3,997 30,283 17,405
Cash flows from investing
activities
Property, plant and equipment (1,840) - (2,198) (9)
Proceeds from sale of equipment 12 - 12 -
-------------------------------------------
Net cash used in investing
activities (1,828) - (2,186) (9)
Cash flows from financing
activities
Proceeds from bank loans - - - 443
Repayment of bank loans (452) - (463) (443)
Due to related party - (2) (111) 440
Increase in share capital, net - - 35,318 -
-------------------------------------------
Net cash provided by financing
activities (452) (482) 34,744 440
Effect of exchange rate changes
on cash 3,673 (744) (722) 897
-------------------------------------------
Net increase in cash 17,626 2,296 62,119 18,733
Cash, beginning of the period 68,250 21,461 23,757 5,024
-------------------------------------------
Cash, end of the period $ 85,876 $ 23,757 $ 85,876 $ 23,757
-------------------------------------------
-------------------------------------------
Supplemental disclosure of cash
information
Interest paid in cash $ 6 $ 7 $ 24 $ 38
Income taxes paid in cash 1,901 1,544 9,631 7,773
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