JINJIANG CITY, China, Aug. 15, 2011 (GLOBE NEWSWIRE) -- Lansdowne Security, Inc. (OTCQB:HGII) (the "Company"), a Jinjiang City, China based designer, producer and distributor of athletic and casual shoes, footwear accessories, and footwear materials sold underneath the brand name "Aierda™", announced its financial results for the first quarter ended March 31, 2011.
First Quarter 2011 Financial Highlights:
- Revenue increased 12%, from $15.7 million in Q1 2010 to $17.6 million in Q1 2011;
- Gross profit improved 7%, from $4.6 million in Q1 2010 to $4.9 million in Q1 2011;
- Adjusted net income grew 30%, from $2.0 million in Q1 2010 to $2.6 million in Q1 2011; and
- Cash position rose 750%, from $0.2 million in Q1 2010 to $1.7 million in Q1 2011.
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Summarized First Quarter 2011 Results: |
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| Q1 2011 | Q1 2010 | CHANGE | |
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Revenue |
$17.6 million | $15.7 million | +12% |
| Gross profit | $4.9 million | $4.6 million | +7% |
| Net Income | $1.4 million | $2.0 million | (30%) |
| Adjusted Net Income* | $2.6 million | $2.0 million | +30% |
| EPS (Diluted)** | $0.14 | $0.21 | (33%) |
| Adjusted EPS** | $0.27 | $0.21 | +29% |
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*Includes non-cash expense of $1.2 million (please see the accompanying Non-GAAP Adjusted Net Income measurements below the "Business Outlook" section). ** Earnings per diluted share of $0.14 on 0.9 million shares. For the first quarter of 2010, the Company reported diluted earnings per share of $0.21 on 0.9 million shares. |
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"Overall, we are very pleased with our first quarter financial results," said Ryan Ding, the Company's Chief Executive Officer. "This year, we focused on the development of our Aierda™ brand shoe business and in the first quarter of 2011, we are starting to see the benefits of employing such a strategy. Our net sales of Aierda™ brand shoes reached approximately $13.5 million in the first quarter of 2011, which is a $3.8 million or 39 percent increase when compared to our sales of these products in the first quarter of 2010. Since our Aierda™ brand shoes are becoming increasingly popular in China and are also providing us with a higher profit margin than the sale of shoes parts and accessories, we are looking to further capitalize of these profitable circumstances by maintaining our focus on the expansion of our Aierda™ brand shoe business."
First Quarter 2011 Financial Results
Revenue
The Company had sales of $17.6 million in the first quarter of 2011, compared to sales of $15.7 million in the first quarter of 2010, an increase of $1.9 million or 12 percent. The Company's 2011 first quarter revenue includes $13.5 million in Aierda™ brand shoe sales, $3.1 million in shoe part and accessory sales, and $1.0 million in OEM product shoe sales. In the first quarter of 2011, the Company continued to take advantage of the economic growth in China by focusing on the production of its Aierda™ brand shoes, which currently have a higher profit margin than the sales of shoe parts and accessories. When compared to the first quarter of 2010, the Company's decrease in the sales of shoe parts and accessories in the first quarter of 2011 is attributable to the Company's business strategy of directing its marketing efforts and other resources towards the development of its Aierda™ brand shoe business.
Gross Profit
The Company's gross profit was $4.9 million in the first quarter of 2011, compared to a gross profit of $4.6 million in the first quarter of 2010, an increase of $0.3 million or 7 percent. Gross profit as a percentage of net revenues was 27.9 percent and 29.2 percent for the first quarter of 2011 and 2010, respectively. The average gross margin of shoe parts and accessories was 25.8 percent in the first quarter of 2011 compared to 30.1 percent for the same period in 2010. The decrease in the Company's consolidated gross margin is due in part to a significant decrease in the gross margin of shoe parts and accessories during this time.
Net Income
The Company's net income was $1.35 million in the first quarter of 2011, compared to $2.0 million in the first quarter of 2010, a decrease of $0.67 million or 33%. This decrease is primarily a reflection of the rise in sales of the Company's Aierda™ brand shoes.
Liquidity & Capital Resources
The Company had cash of $1.7 million at the end first quarter of 2011, compared to $0.2 million at the end of the first quarter of 2010, an increase of $1.5 million or 750 percent.
Recent Updates
In an effort to better meet the heightened demand the Company is seeing for its Aierda™ brand shoes, the Company recently added a new production line that boosted its production capacity up to 3.5 million pairs of shoes annually. Additionally, to facilitate production on its new manufacturing line, The Company recently added 150 new employees. Also, the Company has begun launching its own department stores in China to enhance customers' awareness of Aierda™ brand shoes.
Financial Outlook
Based upon the recent progress of Aierda™ brand shoes, which currently provide a higher gross margin than shoe parts and accessories segment of the Company's business, the Company believes that it has an opportunity to increase its revenues, net income and gross margins in the future. The Company's current growth strategies include maintaining its efforts to enter its Aierda™ brand shoes in more second and third-tier cities in China, which are characterized by quickly growing urban populations with an increasing amount of disposable household income. As of now, the Company is targeting the low to mid-level income consumers in these cities, and is pricing its products significantly lower than many of its larger competitors. With the addition of new sales channels, the Company believes that it will garner a more sizeable customer base that, in effect, will further improve the Company's sales in the future.
Business Outlook
"We are really excited about our future," remarked Mr. Ding. "Our Aierda™ brand shoes are gaining a loyal following in China and we are making every effort to meet our customers' growing demand for these products. In particular, we are working hard to open additional stores throughout China, with the goal of establishing 100 exclusive Aierda™ brand retail locations by 2014. As we strive to expand our sales channels, we are also taking steps to enrich our media and advertising campaigns, as well as our product offerings. We want to be recognized as China's leading provider of quality, affordable shoes and by bolstering our sales network, advertising and market campaigns, and product lines, we believe that we will be heading in the right direction to achieving our goal."
| Non-GAAP Financial Measures | ||
| Quarter Ended March 31 | ||
| 2011 | 2010 | |
| Net income | $1,350,559 | $2,021,627 |
| Non-cash expense | $1,200,000 | $0 |
| Adjusted Net Income | $2,550,559 | $2,021,627 |
The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.
About Lansdowne Security, Inc.
Lansdowne Security, Inc. is primarily engaged in the design, production and wholesale distribution of athletic and casual men's and women's footwear, footwear accessories and footwear materials sold in China under its licensed proprietary brand "Aierda.". The Company also manufactures and exports made-to-order footwear products through third party agents, as well as manufactures and sells footwear materials including insoles, outsoles, linings and heels to other footwear manufacturers in Fujian Province. The Company's branded footwear products, which include approximately 80 low to mid-priced designs, are sold primarily in second-tier PRC markets, secondary provincial capitals, consisting of 23 cities in China, and third-tier PRC markets, consisting of city capitals at the prefecture or county level. The Company operates a 58,000 sq. meter manufacturing facility in Jinjiang City, Fujian Province that produces approximately 2.6 million pairs of shoes per year on two production lines. The Company's footwear products are sold through its network of third-party distributors who sell the Company's products to retail stores and department store boutiques throughout China.
Safe Harbor
This release may contain certain "forward-looking statements" relating to the business of the Company and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "estimates" or similar expressions. These forward-looking statements are based on assumptions about the Company's future, including, but not limited to, continued demand for the Company Athletic Corp.'s products and its abilities to sustain growth for the balance of the year and to generally meet all of its objectives. Such forward-looking statements and the underlying assumptions involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, and concentration in a small number of customers, raw material costs, market acceptance, future capital requirements, and competition in general as well as other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Lansdowne Security, Inc. undertakes no obligation to updates or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
| LANSDOWNE SECURITY INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (UNAUDITED) | ||
| As of | ||
| March 31, | December 31, | |
| 2011 | 2010 | |
| ASSETS | ||
| Current assets | ||
| Cash | $1,739,296 | $234,379 |
| Accounts receivable, net | 11,121,231 | 10,967,947 |
| Inventory | 2,382,269 | 2,323,064 |
| Notes receivable | 251,138 | 250,311 |
| Other current assets | 150,695 | 149,519 |
| Advances to suppliers | 364,364 | 854,005 |
| Due from related party | -- | 217,695 |
| Due from stockholder | -- | 2,984,826 |
| Due from other | -- | 455,112 |
| Total current assets | 16,008,993 | 18,436,858 |
| Property, plant and equipment, net, | 3,119,918 | 3,245,508 |
| Other assets | ||
| Intangible asset, net | 5,228,231 | 5,248,954 |
| Total other assets | 5,228,231 | 5,248,954 |
| Total Assets | $24,357,142 | $26,931,320 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Short-term bank loans | $2,961,903 | $2,952,157 |
| Accounts payable | 4,968,339 | 9,465,946 |
| Accrued expenses | 3,235,629 | 2,735,836 |
| Due to related party | 12,937 | -- |
| Advances from customers | 163,281 | 245,043 |
| Taxes payable | 2,988,078 | 2,757,236 |
| Other current liability | 180,080 | 308,335 |
| Total current liabilities | 14,510,247 | 18,464,553 |
| Total Liabilities | 14,510,247 | 18,464,553 |
| Commitments and contingencies | ||
| Stockholders' equity | ||
| Series A convertible preferred stock $0.001 par value, 10,000,000 shares authorized; | ||
| 9,975 shares issued and outstanding as of March 31, 2011 and December 31,2010 | 10 | 10 |
| Common stock, $0.001 par value; 100,000,000 shares authorized, | ||
| 111,323 shares issued and outstanding as of March 31, 2011 and none outstanding as of December 31, 2010 | 111 | -- |
| Additional paid in capital | 2,903,301 | 2,903,412 |
| Retained earnings | 4,453,985 | 3,103,426 |
| Accumulated other comprehensive income | 2,489,488 | 2,459,919 |
| Total stockholders' equity | 9,846,895 | 8,466,767 |
| Total Liabilities and Stockholders' Equity | $24,357,142 | $26,931,320 |
| The accompanying notes are an integral part of these condensed consolidated financial statements | ||
| LANSDOWNE SECURITY INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||
| (UNAUDITED) | ||
| For the three months ended March 31, | ||
| 2011 | 2010 | |
| Sales | $17,570,187 | $15,673,552 |
| Cost of sales | (12,664,616) | (11,091,122) |
| Gross profit | 4,905,571 | 4,582,430 |
| Selling, general and administrative expenses | (3,053,719) | (1,777,191) |
| Income from operations | 1,851,852 | 2,805,239 |
| Other income (expenses) | ||
| Interest expense, net | (51,107) | (40,619) |
| Total Other income (expenses) | (51,107) | (40,619) |
| Income before income taxes | 1,800,745 | 2,764,620 |
| Provision for income taxes | (450,186) | (742,993) |
| Net income | 1,350,559 | 2,021,627 |
| Other comprehensive income | ||
| Foreign currency translation gain | 29,569 | (37,226) |
| Total Comprehensive income | $1,380,128 | $1,984,401 |
| Basic earnings per share | $22.75 | $34.05 |
| Diluted earnings per share | $0.14 | $0.21 |
| Weighted average number of shares - basic | 59,372 | 59,372 |
| Weighted average number of shares - diluted | 9,424,039 | 9,424,039 |
| The accompanying notes are an integral part of these condensed consolidated financial statements | ||
| LANSDOWNE SECURITY INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (UNAUDITED) | ||
| For the three months ended March 31, | ||
| 2011 | 2010 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net income | $1,350,559 | $2,021,627 |
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Adjustments to reconcile net income to net cash used in operating activities: |
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| Depreciation and amortization | 159,163 | 36,615 |
| Bad debt expense | 10,032 | 22,796 |
| Changes in operating assets and liabilities | ||
| Accounts receivable | (116,895) | (1,679,180) |
| Other assets | (680) | (333,009) |
| Inventories | (51,457) | 3,058,911 |
| Advances to suppliers | 481,668 | 463,277 |
| Accounts payables | (4,521,868) | (2,563,140) |
| Taxes payable | 220,929 | (1,597,264) |
| Advances from customers | (82,443) | 158,227 |
| Other payables and accrued expenses | 377,666 | (676,488) |
| Net cash used in operating activities | (2,173,326) | (1,087,628) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Acquisition of property and equipment | -- | (1,079,245) |
| Due from other | 3,664,046 | (849,478) |
| Net cash provided by (used in) investing activities | 3,664,046 | (1,928,723) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from related party loans | 12,917 | 2,848,660 |
| Net cash provided by financing activities | 12,917 | 2,848,660 |
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | 1,280 | (566) |
| INCREASE (DECREASE) IN CASH | 1,504,917 | (168,257) |
| CASH, BEGINNING OF PERIOD | 234,379 | 279,065 |
| CASH, END OF PERIOD | $1,739,296 | $110,808 |
| SUPPLEMENTAL CASH FLOW DISCLOSURE | ||
| Income taxes paid | $753,421 | $742,993 |
| Interest paid | $51,222 | $40,422 |
| The accompanying notes are an integral part of these condensed consolidated financial statements | ||