NEW YORK, Aug. 9, 2011 /PRNewswire/ --
- Q2/2011 revenue of $45.1 million,
an increase of 31% from Q2/2010
- Q2/2011 net income of $7.3
million, an increase of 22% from Q2/2010
- Fully diluted earnings per share of $0.22, an EPS increase of 22% from Q2/2010
- Anticipates favorable Chinese domestic consumer market
environment for continued growth in 2011
- Board of Directors declares $0.05
per share quarterly dividend for the 3rd quarter
- Affirms and potentially exceeds the current 2011 financial
guidance
Deer Consumer Products, Inc.(Nasdaq: DEER) (website:
http://www.deerinc.com/), a leading provider of "DEER" branded
household consumer products to Chinese consumers and a leading
vertically integrated manufacturer of small household and kitchen
appliances for global customers, announces today record financial
results for the second quarter ended June
30, 2011.
Q2/2011 REVENUE
Second quarter revenue was $45.1
million, an increase of $10.7
million or 31% from $34.5
million for the three months ended June 30, 2010. Approximately 65% of the sales in
the second quarter were generated from China's domestic markets while approximately
35% were from export markets. The increase in revenues was a result
of our expansion of sales in the China domestic market. We were also able to
raise the average selling prices of our products during the quarter
and maintained healthy profit margins across our product lines.
Q2/2011 GROSS PROFIT MARGIN
Our gross profit margin was approximately 29% for the three
months ended June 30, 2011, which
reflects blended profit margins between our higher margin
China domestic sales and generally
lower margins from export sales. Our gross profit margin is higher
in the China domestic markets than
export markets because products are generally sold at much higher
prices on both the retail and wholesale levels in our industry in
China. In addition, we continue to
improve manufacturing efficiency through in-house production of key
components of our products, thereby benefiting further from
economies of scale as we also capture manufacture margins.
Q2/2011 OPERATING EXPENSES
SG&A expenses for the quarter were approximately
$3.9 million, an increase of
$1 million or 36% from $2.9 million for the same period of 2010, as
expected, due to the hiring of additional direct sales staff and
in-store product promoters to further our revenue growth in
China. Our advertising costs
remained minimal during the second quarter of 2011, as expected,
because we use factory representatives and in-store promoters to
promote our products directly to consumers at retail locations,
which is a standard marketing practice in the small household
appliances industry in China. The
in-store promotion approach is highly effective in marketing
products directly to consumers in the unique Chinese retail
environment as compared to traditional mass media advertising
channels that may incur significant advertising expenses without
enhancing sales. According to a survey in the 2010 China Small
Electronics Market Research Report, approximately 60% of Chinese
consumers surveyed purchased small household appliances as a result
of direct product introduction from in-store product promoters.
Like other established domestic brands in China, our in-store promoters market our
products exclusively and directly to in-store customer traffic.
Q2/2011 NET INCOME
Second quarter net income was $7.3
million, an increase of 22% from Q2/2010. Fully diluted
earnings per share were $0.22, an EPS
increase of 22% from Q2/2010.
$4.68 PER SHARE IN NET ASSETS,
STRONG BALANCE SHEET, NO LONG-TERM DEBTS
Deer's shareholders' equity increased to approximately
$157 million, or $4.68 per share in net assets. Deer had more than
$22 million in cash and cash
equivalents at the end of the second quarter without any long-term
debts. Deer has sufficient cash on hand and has no plan to dilute
our shareholders.
MANAGEMENT COMMENTS ON Q2/2011 FINANCIAL RESULTS
Bill He, Chairman & CEO of
Deer commented: "Deer is pleased to report record second quarter
financial results. In 2010, Deer entered China's domestic markets with a strong push by
putting our 'DEER' branded products on the shelves of approximately
3,000 retail locations across China. 'DEER' branded products did especially
well in the Guandong Province, Sichuan
Province, Shaanxi Province,
Zhejiang Province and Shandong Province. In 2011, Deer plans to
continue to expand such store presence across China while adding in-store promotional staff
to further enhance sales and sell-through. During the second
quarter, we experienced strong customer product re-ordering from
existing and new customers, as well as various levels of product
sell-through. In certain product lines and during Chinese holidays,
some of our products sold out completely. We made great efforts to
replenish empty shelf space in some markets."
"China remains the world's
largest and fastest growing consumer retail market and the most
profitable marketplace in the world for small household appliances.
There are approximately 35,000 retail locations across China that Deer could potentially penetrate.
Deer has significant growth potentials in China for years to come."
"Deer anticipates significant revenue and net income growth for
the remainder of 2011. We are comfortable with meeting and
potentially exceeding our earnings guidance for 2011."
CHINA DOMESTIC MARKET EXPANSION STRATEGIES
"Due to the unique retail environment in China where more than 60% of consumers
purchase small household products as a result of direct marketing
push by in-store promotional staff, we target having about 1,000
in-store promotional staff in 2011 and significantly more in 2012
that will exclusively market 'DEER' branded products directly to
end user customers. Deer's strategic focus is revenue growth in the
high margin China domestic markets
through the expansion of a growing 'DEER' branded product
distribution network."
"Chinese consumers have experienced relatively strong positive
real income growth in the past 12 months, which is expected to
accelerate over the course of the year. We believe the rising
standards of living will result in increased demand for quality
consumer goods, such as small appliances. We plan to fully take
advantage of this market opportunity by targeting our high quality
products to these growing middle income Chinese consumers and
providing exceptional customer service."
"We anticipate higher gross margins over time due to an
anticipated greater percentage of our overall blended revenue being
derived from the higher margin China domestic markets. We also anticipate
higher SG&A expenses over time primarily due to adding
additional in-store product promotional staff. We believe that we
will be able to manage SG&A growth along with significant
revenue growth in order to maintain and enhance net profit
margins."
"Deer's growth model is similar to that of Joyoung, China's market leader in the small household
appliances industry. Joyoung has a large number of in-store
promotional staff across China.
Joyoung has built a strong consumer brand over time, maintains 37%
gross profit margins on average and generates almost $1 billion in annual revenue with virtually all
of its sales coming from China's
domestic markets. Like Joyoung, Deer is pursuing a 'DEER' branding
strategy and we constantly enhance our product offerings and adjust
our market positions."
EXPORT SALES
"Our export sales declined in the 2nd quarter because of our
deliberate decision to turn away customers that offered low profit
margins. Manufacturing costs are currently rising in China due to a steady increase in wages and
production costs. As international market prices are unable to
match the increases in manufacturing costs in China, we have decided to focus on the
China domestic market. If current
economic trends continue, our OEM orders will decline. However, we
plan to expand our export sales of our branded products to emerging
markets such as the Middle
East."
COMPANY STRATEGY
"In the short-term we plan to build the reputation of our 'DEER'
branded products to be the number one food preparation appliances
brand by 2013. We also plan to focus sales of our high margin
products, including our dehumidifier, vacuum cleaner, water filters
and air purifier, to Chinese first and second tier cities that are
experiencing strong economic growth."
"Over the course of the next five years, we plan to also expand
our 'DEER' brand in China to
include complete integrated household appliance systems for the
kitchen and bathroom. By 2016, we aim to be one of the top three
manufacturers of integrated household appliances."
"By positioning ourselves as a high end innovative brand, we
believe we can take advantage of the growing demand for household
appliances by China's rapidly
expanding middle class over the next ten years. We also plan to
push our 'DEER' brand products in international markets across
Asia and the Middle East."
3RD QUARTER DIVIDEND APPROVED BY THE BOARD OF DIRECTORS
Deer's Board of Directors approved a $0.05 per share quarterly cash dividend for the
third quarter from future earnings. The dividend will be paid on
October 14, 2011, to shareholders of
record at the close of business on September
30, 2011. Declaration and payment of future quarterly
dividends will be made at the discretion of the Board of
Directors.
AFFIRMS 2011 FINANCIAL GUIDANCE
In 2011, Deer anticipates revenues from the high margin
China domestic sales to surpass
export sales. Deer provides 2011 revenue guidance of between
$200 and $220 million, net income
guidance of between $35 million and $37
million, and targets EPS (Earnings per Share) between
$1.08 and $1.12.
3-YEAR INSIDER SHARE LOCKUP, TOTAL MANAGEMENT COMMITMENT
As disclosed previously, Deer's entire management team has
voluntarily entered into 3-year share lockup agreements, which
prohibit them from selling any shares to the general public through
at least 2013. The lockup agreements represent approximately 47% of
Deer's entire outstanding shares. Deer management's vested
interests are aligned with those of Deer's public shareholders.
Deer has been led by its original founders since the inception of
its operating business 17 years ago.
INVESTOR CONFERENCE CALL
Title: Deer Consumer Products, Inc. 2011 Second Quarter
Earnings Call
Date and time: August 9, 2011,
8:30 AM, US Eastern Daylight Time
International direct: +1 617 614.4070
US Toll free: 1 800 688.0796
Passcode: 829 752 74
About Deer Consumer Products, Inc.
Deer Consumer Products, Inc. is a NASDAQ Global Select Market
listed U.S. company with its primary operations in China. Deer has a 17-year operating business
as well as a strong balance sheet. Operated by Deer's founders and
supported by more than 100 patents, trademarks, copyrights and
approximately 2,000 staff, Deer is a leading provider of "DEER"
branded consumer products to Chinese consumers and a leading
vertically integrated manufacturer of small home and kitchen
appliances for global customers. DEER's product lines include
series of small household and kitchen appliances as well as
personal care products designed to make modern lifestyles easier
and healthier.
Safe Harbor Statement
All statements in this press release that are not historical are
forward-looking statements made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
There can be no assurance that actual results will not differ from
the company's expectations. You are cautioned not to place undue
reliance on any forward-looking statements in this press release as
they reflect Deer's current expectations with respect to future
events and are subject to risks and uncertainties that may cause
actual results to differ materially from those contemplated.
Potential risks and uncertainties include, but are not limited to,
the risks described in Deer's filings with the Securities and
Exchange Commission.
Contact Information:
Corporate Contact:
Ms. Helen Wang, President
Deer Consumer Products, Inc.
Tel: 011-86-755-86028300
Email: investors@deerinc.com
DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
JUNE 30,
2011
|
|
DECEMBER 31,
2010
|
|
ASSETS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash &
equivalents
|
$
22,305,057
|
|
$
33,956,591
|
|
Restricted
cash
|
6,603,895
|
|
1,347,385
|
|
Accounts
receivable
|
52,268,056
|
|
52,686,494
|
|
Advances to
suppliers
|
1,614,631
|
|
3,018,531
|
|
Other
receivables
|
282,933
|
|
125,580
|
|
VAT
receivable
|
5,405,713
|
|
2,839,718
|
|
Prepaid
expenses
|
-
|
|
159,583
|
|
Deposits
|
813,709
|
|
445,740
|
|
Inventories
|
33,863,410
|
|
23,015,850
|
|
|
|
|
|
|
Total
current assets
|
123,157,404
|
|
117,595,472
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
Property and
equipment, net
|
20,722,837
|
|
20,453,404
|
|
Prepayment for
land use rights
|
-
|
|
3,367,207
|
|
Intangible assets,
net
|
36,126,275
|
|
38,308,468
|
|
Construction in
progress
|
11,514,354
|
|
8,913,181
|
|
Other
assets
|
-
|
|
4,570
|
|
|
|
|
|
|
Total
noncurrent assets
|
68,363,466
|
|
71,046,830
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
191,520,870
|
|
$
188,642,302
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Accounts
payable
|
$
16,741,175
|
|
$
26,247,453
|
|
Advance from
customers
|
3,403,110
|
|
1,759,792
|
|
Income tax
payable
|
5,284,657
|
|
5,536,646
|
|
Other payables and
accrued expenses
|
2,331,610
|
|
3,001,716
|
|
Dividend
payable
|
1,679,628
|
|
-
|
|
Notes
payable
|
5,031,637
|
|
8,361,698
|
|
|
|
|
|
|
Total current liabilities
|
34,471,817
|
|
44,907,305
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
Common Stock,
$0.001 par value; 75,000,000 shares
authorized;
33,592,562 shares issued and
outstanding
as of June 30, 2011 and
December
31, 2010, respectively
|
33,593
|
|
33,593
|
|
Paid-in
capital
|
91,136,274
|
|
91,084,958
|
|
Statutory
reserve
|
7,577,047
|
|
6,127,639
|
|
Development
fund
|
3,788,523
|
|
3,063,819
|
|
Accumulated other
comprehensive income
|
9,797,344
|
|
6,315,475
|
|
Retained
earnings
|
44,716,272
|
|
37,109,513
|
|
|
|
|
|
|
Total stockholders' equity
|
157,049,053
|
|
143,734,997
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
191,520,870
|
|
$
188,642,302
|
|
|
|
|
|
DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
Three Months
Ended June 30,
|
|
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
79,803,830
|
$
58,353,144
|
|
$
45,127,684
|
$
34,450,687
|
|
Cost of revenue
|
56,697,985
|
41,593,643
|
|
31,978,784
|
24,569,034
|
|
|
|
|
|
|
|
|
Gross profit
|
23,105,845
|
16,759,501
|
|
13,148,900
|
9,881,653
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Selling
|
5,529,852
|
3,248,420
|
|
2,912,415
|
1,820,456
|
|
General and
administrative
|
2,274,687
|
1,764,689
|
|
1,034,061
|
1,089,623
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
7,804,539
|
5,013,109
|
|
3,946,476
|
2,910,079
|
|
|
|
|
|
|
|
|
Income from
operations
|
15,301,306
|
11,746,392
|
|
9,202,424
|
6,971,574
|
|
|
|
|
|
|
|
|
Non-operating income
(expenses)
|
|
|
|
|
|
|
Interest
income
|
108,700
|
331,060
|
|
46,165
|
239,139
|
|
Interest
expense
|
-
|
(49,461)
|
|
-
|
(19,755)
|
|
Exchange
loss
|
(266,855)
|
(125,810)
|
|
(150,732)
|
(92,676)
|
|
Subsidy
income
|
1,007,192
|
-
|
|
7,960
|
-
|
|
Other
|
(81,767)
|
8,223
|
|
(43,469)
|
22,824
|
|
|
|
|
|
|
|
|
Total
non-operating income (expenses), net
|
767,270
|
164,012
|
|
(140,076)
|
149,532
|
|
|
|
|
|
|
|
|
Income before income
tax
|
16,068,576
|
11,910,404
|
|
9,062,348
|
7,121,106
|
|
Income tax expense
|
2,928,099
|
1,852,841
|
|
1,715,817
|
1,100,566
|
|
|
|
|
|
|
|
|
Net income
|
13,140,477
|
10,057,563
|
|
7,346,531
|
6,020,540
|
|
|
|
|
|
|
|
|
Other comprehensive
item
|
|
|
|
|
|
|
Foreign currency
translation
|
3,481,869
|
398,436
|
|
2,005,459
|
363,071
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
$
16,622,346
|
$
10,455,999
|
|
$
9,351,990
|
$
6,383,611
|
|
|
|
|
|
|
|
|
Basic weighted average shares
outstanding
|
33,592,562
|
32,826,777
|
|
33,592,562
|
33,019,662
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding
|
33,592,562
|
33,729,852
|
|
33,592,562
|
33,703,876
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
0.39
|
$
0.31
|
|
$
0.22
|
$
0.18
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
0.39
|
$
0.30
|
|
$
0.22
|
$
0.18
|
|
|
|
|
|
|
|
DEER
CONSUMER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
SIX MONTHS
ENDED JUNE 30, 2011 AND 2010
(UNAUDITED)
|
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
Net income
|
$
13,140,477
|
$
10,057,563
|
|
Adjustments to reconcile net income
|
|
|
|
to net cash used in operating activities:
|
|
|
|
Depreciation and amortization
|
1,438,861
|
716,576
|
|
Stock-based compensation
|
51,314
|
166,695
|
|
(Increase)
decrease in current assets:
|
|
|
|
Accounts receivable
|
1,631,055
|
(5,742,579)
|
|
Advances to suppliers
|
1,458,712
|
(130,127)
|
|
Other receivables, prepayments, and
deposits
|
(346,960)
|
(178,052)
|
|
Other assets
|
4,628
|
(84,155)
|
|
Inventories
|
(10,200,635)
|
(4,445,193)
|
|
Increase
(decrease) in current liabilities:
|
|
|
|
Accounts payable
|
(9,998,292)
|
888,735
|
|
Advance from customers
|
1,617,080
|
(687,059)
|
|
Taxes payable
|
(2,847,344)
|
(296,630)
|
|
Notes payable
|
(3,487,834)
|
-
|
|
Other payables and accrued
expenses
|
(742,220)
|
(271,367)
|
|
|
|
|
|
Net cash used in operating activities
|
(8,281,158)
|
(5,592)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
Changes in restricted cash
|
(5,169,534)
|
(1,786,204)
|
|
Acquisition of property &
equipment
|
(889,945)
|
(686,066)
|
|
Acquisition of intangible
asset
|
(4,270,594)
|
(379,267)
|
|
Refund of deposit on land use
right
|
10,380,731
|
-
|
|
Construction in progress
|
(2,367,640)
|
(2,008,746)
|
|
|
|
|
|
Net cash used in investing activities
|
(2,316,982)
|
(4,860,283)
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
Dividend paid
|
(1,679,978)
|
-
|
|
Proceeds from exercise of
warrants
|
-
|
6,951,527
|
|
Purchase of treasury shares
|
-
|
(6,945,950)
|
|
Offering costs paid
|
-
|
(320,000)
|
|
|
|
|
|
Net cash used in financing activities
|
(1,679,978)
|
(314,423)
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE
ON CASH & EQUIVALENTS
|
626,584
|
143,413
|
|
|
|
|
|
NET DECREASE IN CASH &
EQUIVALENTS
|
(11,651,534)
|
(5,036,885)
|
|
|
|
|
|
CASH & EQUIVALENTS,
BEGINNING OF PERIOD
|
33,956,591
|
79,333,729
|
|
|
|
|
|
CASH & EQUIVALENTS, END OF
PERIOD
|
$
22,305,057
|
$
74,296,844
|
|
|
|
|
|
Supplemental Cash flow
data:
|
|
|
|
Income tax
paid
|
$
3,213,565
|
$
1,251,617
|
|
Interest paid
|
$
-
|
$
-
|
|
|
|
|
SOURCE Deer Consumer Products, Inc.