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InfoSonics Reports Second Quarter 2010 Results
16 Aug, 2010 @ 04:30 pm EDT
SAN DIEGO, Aug. 16 /PRNewswire-FirstCall/ -- InfoSonics Corporation (Nasdaq: IFON), one of the premier providers of wireless handset solutions serving Latin America, today announced results for its second quarter ended June 30, 2010.
"Our results this quarter reflect the transition our company is going through," said Joseph Ram, the company's President and Chief Executive Officer. "In the past, we were primarily a distributor in Latin America of handsets produced by others. We are now transforming our business to become primarily a designer and manufacturer of handsets serving Latin America and other emerging markets. This shift has been accelerated by the introduction in late 2009 of a substantial import tariff in Argentina, our primary market, as well as a more competitive landscape as tier-one manufacturers respond to margin squeeze."
Commenting on InfoSonics' change in strategy, Mr. Ram continued, "For many years we have enjoyed a robust distribution business with high volumes, but with very thin margins. Envisioning changes to the industry, in early 2007 we worked with contract developers and manufacturers and launched our own proprietary line of handsets under the verykool® label. Sales of these phones produce higher gross margins compared to our distribution business. Although we have enjoyed success with our products in Latin America, we needed a way to accelerate our progress. In May 2010, after much research and diligence, we founded a new R&D center in Beijing, China. Referred to as verykool China, this entity was formed through an agreement with a very experienced Chinese development and business team and will operate under the umbrella of verykool USA, a wholly owned subsidiary of InfoSonics. This new in-house team will help us design and develop a broader line of verykool handsets, and should enable us to break into other emerging markets outside our traditional Latin American market. Our goal in bringing a large portion of R&D in-house is to deliver more sophisticated and costeffective products, accelerate our time-to-market and protect our intellectual property and business processes internally. We are pleased with the team's progress to date and are excited about our prospects for the future. We expect to deliver our first internally designed phone to customers beginning in the second half of 2010."
InfoSonics reported net sales for the second quarter of 2010 of $22.4 million, compared to $61.7 million for the second quarter of 2009 and $27.5 million on a sequential basis for the first quarter of 2010. The decrease in net sales in both periods was due principally to reductions in Argentina distribution sales caused by the recently enacted import tariff, which can increase the price of imported handsets by up to 30 percent. Gross margin in the second quarter of 2010 was 7.0 percent, compared to 6.6 percent in the second quarter of 2009 and 5.2 percent in the first quarter of 2010. The improved margin in the current quarter resulted from a higher percentage of sales derived from the company's verykool product line.
Operating expenses in the second quarter of 2010 were $2.4 million, compared to $3.6 million in the second quarter of 2009 and $2.0 million in the first quarter of 2010. The second quarter of 2010 includes $227,000 in research and development expenses related to the company's new China development subsidiary. Expenses in the first quarter of 2010 benefited from a $400,000 recovery of bad debt expense. The reduction in expenses compared to the second quarter of 2009 was primarily attributable to lower sales commissions and other revenue-related variable expenses, as well as reductions in headcount, lower bad debt expense and other cost efficiencies.
The net loss in the second quarter of 2010 was reduced by an income tax benefit of $400,000 from the carry-back of U.S. federal income tax losses in 2007 and 2008 to prior years.
The company ended the second quarter of 2010 with $12.5 million in cash and cash equivalents, compared to $18.4 million at the end of 2009. During the second quarter of 2010, the company repaid all outstanding indebtedness under its bank line of credit and has no other funded debt. Stockholders' equity at June 30, 2010 amounted to $24.0 million, equivalent to $1.70 per common share outstanding.
About InfoSonics Corporation
InfoSonics is a provider of wireless handsets and related products to carriers and distributors in Latin America. InfoSonics distributes products supplied by OEMs and also designs, develops, manufactures markets, sells and provides after-sales support for its own proprietary line of products under the verykool® brand. For additional information, please visit www.infosonics.com.
Except for the factual statements made herein, the information contained in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and assumptions that are difficult to predict. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as "believes," "hopes," "intends," "estimates," "expects," "projects," "plans," "anticipates" and variations thereof, or the use of future tense, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Such forward-looking statements are not guarantees of performance and our actual results could differ materially from those contained in such statements. Factors that could cause or contribute to such differences include, without limitation: (1) intense competition internationally, including competition from alternative business models, such as manufacturer-to-carrier sales, which may lead to reduced prices, lower sales, lower gross margins, extended payment terms with customers, increased capital investment and interest costs, bad debt risks and product supply shortages; (2) dependency on sales in Argentina which have been and will continue to be significantly reduced or eliminated as a result of the recently adopted import tariff in that country; (3) the ability of the Company's new China R&D group to develop new verykool® handsets and successfully introduce them into new emerging markets; (4) extended general economic downturn in world markets; (5) inability to secure adequate supply of competitive products on a timely basis and on commercially reasonable terms; (6) foreign exchange rate fluctuations, devaluation of a foreign currency, adverse governmental controls or actions, political or economic instability, or disruption of a foreign market, including, without limitation, the imposition, creation, increase or modification of tariffs, taxes, duties, levies and other charges and other related risks of our international operations, such as the recently adopted tax/duty change in Argentina on certain electronics (including cellular phones), which could significantly increase selling prices to our customers and end-users; (7) the ability to attract new sources of profitable business from expansion of products or services or risks associated with entry into new markets, including geographies, products and services; (8) an interruption or failure of our information systems or subversion of access or other system controls may result in a significant loss of business, assets or competitive information; (9) significant changes in supplier terms and relationships or shortages in product supply; (10) continued consolidation in the wireless handset carrier market; (11) loss of business from one or more significant customers; (12) customer and geographical accounts receivable concentration risk and other related risks; (13) rapid product improvement and technological change resulting in inventory obsolescence; (14) uncertain political and economic conditions internationally, including terrorist or military actions; (15) the loss of a key executive officer or other key employees and the integration of new employees; (16) changes in consumer demand for multimedia wireless handset products and features; (17) our failure to adequately adapt to industry changes and to manage potential growth and/or contractions; (18) seasonal buying patterns; (19) the resolution of any litigation for or against the Company; (20) the recent loss of the Company's bank line of credit and the ability of the company to have access to adequate capital to fund its operations; and (21) the ability of the Company to generate taxable income in future periods. Reference is also made to other factors detailed from time to time in our periodic reports filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements to reflect new information, events or circumstances after the date of this release.
InfoSonics Corporation and Subsidiaries
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(unaudited)
For the Three Months
Ended June 30,
--------------
2010 2009
---- ----
Net sales $22,353 $61,706
Cost of sales 20,784 57,634
------ ------
Gross profit 1,569 4,072
----- -----
Operating expenses
Selling, general and administrative 2,134 3,549
Research and development 227 10
--- ---
2,361 3,559
----- -----
Operating income (loss) from
continuing operations (792) 513
Other income (expense)
Other income 3 -
Interest expense - (109)
--- ----
Income (loss) from continuing
operations before benefit
(provision) for income taxes (789) 404
Benefit (provision) for income taxes 399 (7)
--- ---
Income (loss) from continuing
operations (390) 397
Income (loss) from discontinued
operations, net of tax (Note 11) 76 (167)
--- ----
Net income (loss) $(314) $230
===== ====
Basic earnings (loss) per share:
Continuing operations $(0.03) $0.03
Discontinued operations 0.01 (0.01)
---- -----
Net income (loss) $(0.02) $0.02
====== =====
Diluted earnings (loss) per share:
Continuing operations $(0.03) $0.03
Discontinued operations 0.01 (0.01)
---- -----
Net income (loss) $(0.02) $0.02
====== =====
Basic weighted-average number of
common shares outstanding 14,184 14,593
====== ======
Diluted weighted-average number of
common shares outstanding 14,184 14,786
====== ======
For the Six Months
Ended June 30,
--------------
2010 2009
---- ----
Net sales $49,894 $104,331
Cost of sales 46,884 96,904
------ ------
Gross profit 3,010 7,427
----- -----
Operating expenses
Selling, general and administrative 4,088 6,401
Research and development 247 35
--- ---
4,335 6,436
----- -----
Operating income (loss) from
continuing operations (1,325) 991
Other income (expense)
Other income 2 -
Interest expense (23) (137)
--- ----
Income (loss) from continuing
operations before benefit
(provision) for income taxes (1,346) 854
Benefit (provision) for income taxes 395 (17)
--- ---
Income (loss) from continuing
operations (951) 837
Income (loss) from discontinued
operations, net of tax (Note 11) 70 (359)
--- ----
Net income (loss) $(881) $478
===== ====
Basic earnings (loss) per share:
Continuing operations $(0.07) $0.06
Discontinued operations 0.01 (0.02)
---- -----
Net income (loss) $(0.06) $0.04
====== =====
Diluted earnings (loss) per share:
Continuing operations $(0.07) $0.06
Discontinued operations 0.01 (0.02)
---- -----
Net income (loss) $(0.06) $0.04
====== =====
Basic weighted-average number of
common shares outstanding 14,184 14,737
====== ======
Diluted weighted-average number of
common shares outstanding 14,184 14,851
====== ======
InfoSonics Corporation
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
December
June 30, 31,
2010 2009
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $12,459 $18,418
Accounts receivable, net of allowance for
doubtful accounts of $191 and $590 18,197 41,914
Accounts receivable other 1,365 1,004
Inventory, net of reserves of $99 and
$112 2,330 3,423
Prepaid assets 370 369
Assets of discontinued operations 951 880
--- ---
Total current assets 35,672 66,008
Property and equipment, net 304 316
Other assets 91 98
--- ---
Total assets $36,067 $66,422
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,655 $9,619
Accrued expenses 3,277 5,666
Line of credit - 25,494
Income taxes payable 95 91
Liabilities of discontinued operations 62 724
--- ---
Total current liabilities 12,089 41,594
------ ------
Commitments and Contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000
shares authorized (no shares issued and
outstanding) - -
Common stock, $0.001 par value, 40,000
shares authorized; 14,184 shares issued
and outstanding 14 14
as of June 30, 2010 and December 31, 2009
Additional paid-in capital 31,769 31,727
Accumulated other comprehensive loss (18) (7)
Accumulated deficit (7,787) (6,906)
------ ------
Total stockholders' equity 23,978 24,828
------ ------
Total liabilities and stockholders'
equity $36,067 $66,422
======= =======
InfoSonics Corporation
Consolidated Statements of Cash Flows
(Amounts in thousands)
(unaudited)
For the Six Months
Ended
June 30,
--------
2010 2009
---- ----
Cash flows from operating activities:
Net income (loss) $(881) $478
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities
Depreciation 152 121
Provision for (recovery of) bad debt (399) 151
Provision for obsolete inventory - 63
Stock-based compensation expense 42 31
(Increase) decrease in:
Accounts receivable 24,116 (29,179)
Accounts receivable other (361) 3,781
Inventory 1,094 (548)
Prepaids (1) (43)
Other assets 6 (90)
Increase (decrease) in:
Accounts payable (964) (1,129)
Accrued expenses (2,388) 179
Income tax liabilities 4 15
--- ---
Cash provided by (used in) continuing operations 20,420 (26,170)
Cash provided by (used in) discontinued
operations (733) 296
---- ---
Net cash provided by (used in) operating
activities 19,687 (25,874)
------ -------
Cash flows from investing activities:
Purchase of property and equipment (141) (51)
---- ---
Net cash used in investing activities (141) (51)
---- ---
Cash flows from financing activities:
Net borrowings (payments on) line of credit (25,494) 17,202
Cash paid for treasury stock - (483)
--- ----
Net cash provided by (used in) financing
activities (25,494) 16,719
------- ------
Effect of exchange rate changes on cash (11) 14
--- ---
Net decrease in cash and cash equivalents (5,959) (9,192)
Cash and cash equivalents, beginning of period 18,418 24,715
------ ------
Cash and cash equivalents, end of period $12,459 $15,523
======= =======
Cash paid for interest $23 $137
Cash paid for taxes - -
SOURCE InfoSonics Corporation
For more iinformation, go to www.prnewswire.com
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