JINJIANG, China, May 12, 2011 (GLOBE NEWSWIRE) -- 8888 Acquisition Corporation (OTCQB:EGHA) ("Chengchang Shoes" or the "Company"), in the business of designing, producing and selling high quality soles to manufacturers of athletic and leisure shoes in China, today reported its fiscal 2011 third quarter financial results for the period ending March 31, 2011.
Third Quarter Fiscal 2011 Financial Highlights
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Revenue rose 150% to $10.4 million from $4.2 million in the third quarter of fiscal year 2010
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Gross profit grew 171% to $3.9 million from $1.4 million in the third quarter of fiscal year 2010
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Net income increased 167% to $2.4 million from $0.9 million in the third quarter of fiscal year 2010
- Basic and diluted earnings per share increased to $0.07 from $0.03 in the third quarter of fiscal year 2010, despite an increase of approximately 2.5 million shares outstanding
"We are very pleased to see another robust quarter of revenue and earnings growth, which is a strong testimony to the success of our new lines of EVO products launched in May 2010," commented Chengchang Shoes' Chairman and Chief Executive Officer, Mr. Guoqing Zhuang. "Our proprietary EVO soles, featuring favorable abrasion resistance and enhanced cushioning relative to standard EVA soles, have been very well received in the market and are attracting more customer orders. We will continue to develop new products to consolidate Chengchang's leadership as a product innovator in China's rapidly growing sports shoes industry. We are confident that we have the right business strategy, supported by our experienced R&D team and efficient operating system, to meet strong current demand for our shoe sole products."
Third Quarter Fiscal 2011 Results
In the third quarter of fiscal 2011, total revenue increased 150% to $10.4 million, from $4.2 million in the comparable period of fiscal 2010. The significant increase in revenue was driven by incremental sales from the Company's EVO soles and EVO compound pellets products, which contributed $5.3 million and $2.3 million, respectively, in the third fiscal quarter, somewhat offset by declining revenue from the Company's other product categories. The Company's EVO sole and EVO compound pellet product lines, launched in May 2010, did not contribute to revenue in the third quarter of fiscal 2010.
Gross profit grew 171% to $3.9 million in the third quarter fiscal 2011, from $1.4 million in the comparable period of fiscal 2010. The increase in gross profit was primarily due to increased sales of the Company's higher margin EVO sole and EVO compound pellet products. The Company's overall gross margin increased to 37.3% in the third quarter of fiscal 2011 from 34.5% in the same quarter of fiscal 2010.
Selling expenses in the third quarter of fiscal 2011 were $65,828, or 0.6% of total revenue, compared to $26,891, or 0.6% of total revenue, in the comparable quarter of fiscal 2010.
General and administrative expenses in the third quarter of fiscal 2011 totaled $340,560, or 3.3% of total revenue, compared to $164,222, or 3.9% of total revenue, in the same period last year. The year-over-year increase in general and administrative expenses primarily reflects incremental public company costs, higher employee disability and welfare benefit payments as a result of a PRC governmental policy change in 2010.
Income from operations in the third quarter of fiscal 2011 was $3.5 million, an increase of 180% compared to $1.2 million last year.
Third quarter fiscal 2011 net income totaled $2.4 million, or $0.07 per diluted share, 167% higher than net income of $0.9 million, or $0.03 per diluted share, in the corresponding period of fiscal 2010.
First Nine Months Fiscal Year 2011 Results
For the nine month period ended March 31, 2011, total revenue was $36.7 million, an increase of 119% year-over-year, largely attributable to incremental sales of the Company's EVO sole and EVO compound pellet products launched in May 2010. Gross profit for the nine months ended March 31, 2011 was $14.4 million, up 126% from $6.4 million for the nine months ended March 31, 2010. Gross margin was 39.4% for the nine months ended March 31, 2011, compared to 38.1% in the comparable prior year period. Net income for the nine months ended March 31, 2011 was $9.6 million, or $0.29 per diluted share, an increase of 122% as compared to the net income of $4.3 million, or $0.14 per diluted share, in the corresponding period a year ago.
Financial Condition
As of March 31, 2011, cash and cash equivalents totaled $17.8 million, up 173% from $6.5 million on June 30, 2010. Accounts receivable increased to $14.9 million at the end of third quarter fiscal 2011, from $11.7 million at the end of June 2010, largely reflecting increased customer sales. At March 31, 2011, the Company had working capital of $22.3 million and a current ratio of 3.0. Stockholders' equity totaled $31.1 million, up from $16.9 million on June 30, 2010. Net cash provided by operations was $8.8 million for the nine months ended March 31, 2011, compared with net cash provided by operations of $5.6 million for the same period in 2010.
Business Outlook
In light of the strong demand for the Company's proprietary EVO products, the Company has decided to lease a new 30,000 square meter manufacturing facility, which is expected to commence operation in June 2011. The Company also plans to purchase additional manufacturing equipment to ramp up production to meet increasing demand for its products during the remainder of the year. In addition, the Company is currently promoting its new proprietary dual-color, dual-hardness foam sole products, which the Company believes are extremely innovative and unique compared to other offerings in China's footwear market.
About 8888 Acquisition Corporation
The Company, through its wholly owned subsidiary, Jinjiang Chengchang Shoes Co., Ltd, is a leading designer and producer of high quality soles marketed to manufacturers of athletic and leisure shoes in China. From its strategically located manufacturing facilities in Jinjiang, Fujian Province, the Company distributes soles to its customers, which include many of China's well recognized sportswear companies and an OEM supplier of Adidas® in Asia. The Company categorize its sole products into three primary product lines: (i) EVA, or ethylene vinyl acetate, sole products; (ii) RB, or synthetic rubber, sole products; and (iii) EVO, or EVO outsole, products which are an outgrowth of its EVA product line that is designed to be more abrasive resistance and lighter and softer than EVA product line. The Company also offers EVO compound pellet products. For more information, please visit: http://www.chandracn.com.
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning market demand for our products, our new manufacturing facility, our future operating and financial results, our expectations regarding sales of our EVO soles and EVO compound pellet products, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Forward-looking statements can be identified by the use of forward-looking terminology such as "will," "believes," "expects" or similar expressions. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and based upon premises with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on October 25, 2010, as amended, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system at http://www.sec.gov.
| 8888 Acquisition Corporation | ||||
| Unaudited Consolidated Balance Sheets | ||||
| As of March 31, 2011 and June 30, 2010 | ||||
| (Stated in US Dollars) | ||||
| March 31, 2011 | June 30, 2010 | |||
| Assets | [unaudited] | [audited] | ||
| Current assets | ||||
| Cash and cash equivalents | $ 17,752,590 | $ 6,513,199 | ||
| Restricted cash | -- | 517,728 | ||
| Accounts receivable, net | 14,878,630 | 11,656,785 | ||
| Inventory | 318,993 | 196,958 | ||
| Advance to Suppliers | 443,448 | -- | ||
| Prepaid expenses and taxes | 7,308 | 1,762 | ||
| Total current assets | 33,400,969 | 18,886,432 | ||
| Non-current assets | ||||
| Plant and equipment, net | 5,317,040 | 5,671,102 | ||
| Intangible assets, net | 3,169,260 | 3,246,985 | ||
| Deposits | 336,652 | 42,780 | ||
| Total non-current assets | 8,822,952 | 8,960,867 | ||
| Total Assets | $ 42,223,921 | $ 27,847,299 | ||
| Liabilities and Stockholders' Equity | ||||
| Liabilities | ||||
| Current liabilities | ||||
| Bank loans | $3,713,794 | $2,787,651 | ||
| Notes payable | -- | 1,725,759 | ||
| Accounts payable and accruals | 5,917,984 | 5,055,751 | ||
| Taxes payable | 1,332,509 | 1,333,397 | ||
| Related party payable | 119,989 | -- | ||
| Total current liabilities | $ 11,084,276 | $ 10,902,558 | ||
| Total Liabilities | $11,084,276 | $10,902,558 | ||
| Stockholders' Equity | ||||
|
Preferred stock, $0.0001 par value, 50,000,000 shares authorized; 0 share issued and outstanding as of March 31, 2011 and June 30, 2010 respectively |
$ -- | $ -- | ||
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 33,966,667 and 31,419,167 shares issued and outstanding as of March 31, 2011 and June 30, 2010 respectively |
3,397 | 3,142 | ||
| Additional paid-in capital | 5,197,929 | 1,279,740 | ||
| Statutory reserves | 750,389 | 750,389 | ||
| Retained earnings | 24,129,876 | 14,535,006 | ||
| Accumulated other comprehensive income | 1,058,054 | 376,464 | ||
| Total stockholders' equity | 31,139,645 | 16,944,741 | ||
| Total Liabilities and Stockholders' Equity | $ 42,223,921 | $ 27,847,299 | ||
| 8888 Acquisition Corporation | ||||||||
| Unaudited Consolidated Statements of Income | ||||||||
| For the three months and nine months ended March 31, 2011 and 2010 | ||||||||
| (Stated in US Dollars) | ||||||||
| Three Months Ended March 31 | Nine Months Ended March 31 | |||||||
| 2011 | 2010 | 2011 | 2010 | |||||
| Revenue | $ 10,432,547 | $ 4,170,644 | $ 36,665,296 | $ 16,728,146 | ||||
| Cost of revenue | 6,536,831 | 2,732,827 | 22,231,230 | 10,351,000 | ||||
| Gross profit | 3,895,716 | 1,437,817 | 14,434,066 | 6,377,146 | ||||
| Selling expenses | 65,828 | 26,891 | 286,010 | 102,758 | ||||
| General and administrative expenses | 340,560 | 164,222 | 898,401 | 365,653 | ||||
| Total operating expenses | 406,388 | 191,113 | 1,184,411 | 468,411 | ||||
| Operating income | 3,489,328 | 1,246,704 | 13,249,655 | 5,908,735 | ||||
| Other income | -- | 7,853 | -- | 8,835 | ||||
| Other expense | (159,979) | -- | (245,203) | -- | ||||
| Interest income | 16,660 | -- | 32,133 | -- | ||||
| Interest expense | (41,308) | (37421) | (149,103) | (150,898) | ||||
| Total other income/(expenses) | (184,627) | (29,568) | (362,173) | (142,063) | ||||
| Pre-tax income | 3,304,701 | 1,217,136 | 12,887,482 | 5,766,672 | ||||
| Provisions for income tax | 865,340 | 302,450 | 3,292,612 | 1,439,840 | ||||
| Net income (loss) | $ 2,439,361 | $ 914,686 | $ 9,594,870 | $ 4,326,832 | ||||
| Earnings per share | ||||||||
| Basic | $ 0.07 | $ 0.03 | $ 0.29 | $ 0.14 | ||||
| Diluted | $ 0.07 | $ 0.03 | $ 0.29 | $ 0.14 | ||||
| Weighted average shares outstanding | ||||||||
| Basic | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | ||||
| Diluted | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | ||||
| 8888 Acquisition Corporation | ||||
| Unaudited Consolidated Statements of Cash Flows | ||||
| For the three months and nine months ended March 31, 2011 and 2010 | ||||
| (Stated in US Dollars) | ||||
| Three Months Ended March 31 | Nine Months Ended March 31 | |||
| 2011 | 2010 | 2011 | 2010 | |
| Net Income/(loss) | $2,439,361 | $914,685 | $9,594,870 | $4,326,832 |
| Adjustments to reconcile net income to net cash from operations: | ||||
| Amortization | 23,364 | 19,223 | 77,725 | 58,887 |
| Depreciation | 348,502 | 304,413 | 1,182,305 | 915,543 |
| Loss on disposal of fixed asset | 156,983 | -- | 225,994 | -- |
| Provision for bad debt | -- | -- | 16,190 | -- |
| Changes in operating assets and liabilities: | ||||
| (Increase)/decrease in restricted cash | 476,421 | (307,232) | 517,728 | (300,650) |
| (Increase)/decrease in accounts and other receivables | 2,059,915 | 2,275,626 | (3,681,483) | 1,479,640 |
| (Increase)/decrease in inventories | (31,290) | 382,172 | (122,035) | 989,723 |
| (Increase)/decrease in prepaid expenses | (5,491) | (5,266) | (5,544) | (5,091) |
| Increase/(decrease) in accounts payables and accruals | (1,927,391) | (2,482,231) | 982,221 | (1,495,474) |
| Increase/(decrease) in taxes payables | (127,216) | (235,261) | (888) | (334,381) |
| Net cash provided by operating activities | 3,413,158 | 866,129 | 8,787,083 | 5,635,029 |
| Cash flows from investing activities | ||||
| Proceeds from disposal of fixed assets | 15,365 | -- | 39,565 | -- |
| Payments for deposits | (300,608) | (46,482) | (293,872) | (46,482) |
| Payments for land use rights | -- | -- | -- | -- |
| Payments for purchases of plant and equipment | (229,315) | (250,849) | (1,093,802) | (360,822) |
| Net cash provided/(used) in investing activities | (514,558) | (297,331) | (1,348,109) | (407,304) |
| Cash flows from financing activities | ||||
| Proceeds from Issuance of common stock | -- | -- | 3,918,444 | -- |
| Proceeds from/(repayments of) notes | (476,421) | 1,024,106 | (1,725,759) | 1,002,167 |
| Proceeds from/(repayment of) bank loans | 782,671 | (748,398) | 926,143 | (748,398) |
| Repayment of loan to related party | -- | -- | -- | (2,998,303) |
| Net cash provided/(used) in financing activities | 306,250 | 275,708 | 3,118,828 | (2,744,534) |
| Net Increase of cash and cash equivalents | 3,204,850 | 844,505 | 10,557,802 | 2,483,191 |
| Effect of foreign currency translation on cash | 142,779 | 1,355 | 681,590 | 2,039 |
| Cash and cash equivalents at beginning of year | 14,404,961 | 4,599,526 | 6,513,198 | 2,960,156 |
| Cash and cash equivalents at end of year | $17,752,590 | $5,445,386 | $17,752,590 | $5,445,386 |