SHANGHAI, March 12, 2020 /PRNewswire/ -- Acorn
International, Inc. (NYSE: ATV) ("Acorn" or the "Company"), a
leading marketing and branding company in China, today announced its preliminary
unaudited financial results for the fourth quarter and year ended
December 31, 2019.
Fourth Quarter 2019 Financial Highlights
- Net revenues increased 21.9% year-over-year in Q4 2019 to
US$9.1 million.
- Gross profit rose 16.8% year-over-year in Q4 2019 to
US$6.3 million.
- Gross margin was 68.8% in Q4 2019, compared to 71.8% in Q4
2018.
- Income from continuing operations was US$0.4 million in Q4 2019, compared to
US$1.6 million in Q4 2018.
- Net income was US$1.7 million in
Q4 2019 as compared to net income of US$3.7
million in Q4 2018. In Q4 2019, the Company recorded a
$1.3 million gain from the sale
of its subsidiary Zhuhai Acorn Electronic Technology Co., Ltd.
("Zhuhai Acorn"). The year-ago period includes a US$2.0 million gain from the sale of the
Company's Bright Rainbow Investments Limited ("Bright Rainbow")
subsidiary.
Full Year 2019 Financial Highlights
- Net revenues increased 49.5% year-over-year in 2019 to
US$37.5 million.
- Gross profit rose 46.4% year-over-year in 2019 to US$27.0 million.
- Gross margin was 72.1% in 2019, compared to 74.3% in 2018.
- Income from continuing operations was US$1.8 million in 2019, compared to US$2.6 million in 2018.
- Net income was US$7.8 million in
2019 as compared to net income of US$31.1
million in 2018. In 2019, the Company recorded a
US$3.8 million gain on the sale
of its former principal office in Shanghai to a third
party and a US$1.3 million gain
from the sale of its Zhuhai Acorn subsidiary, to a third party. Full-year 2018
results include a US$32.1 million gain from the sale Bright
Rainbow.
"We closed 2019 on a positive note, with revenues up 49.5%,
gross margin in excess of 70%, and net income of US$7.8 million," said Mr. Jacob A. Fisch, CEO and President of Acorn
International. "Both our Babaka branded posture correction products
and Acorn Fresh had strong 11.11 Singles Day e-commerce
performance, supporting a strong quarter and the close to a strong
year."
"The year 2020 has brought the COVID-19 crisis, and we are
making every effort to support our employees, customers and
partners through this challenging time. While some of our
businesses are seeing increasing demand as more Chinese consumers
are shopping from home, we are concerned about supply-side
disruption, delivery challenges and the potential for waning
consumer demand caused by COVID-19. We continue to monitor this
rapidly evolving situation and are taking measures to cut costs and
conserve our cash reserves," Mr. Fisch concluded.
Preliminary Financial Results for the Fourth Quarter of
2019:
Total net revenues were US$9.1
million in the fourth quarter of 2019, up 21.9% from
US$7.5 million in the fourth quarter
of 2018, primarily due to an increase in e-commerce sales of Babaka
branded products and other products, which was partially offset by
lower revenues of oxygen-generating products related primarily to
the sale of Zhuhai Acorn.
Cost of sales in the fourth quarter of 2019 was US$2.9 million, up 34.9% from US$2.1 million in the fourth quarter of 2018. The
increase was attributable to increased sales volume and net
revenues.
Gross profit in the fourth quarter of 2019 was US$6.3 million, up 16.8% from US$5.4 million in the fourth quarter of 2018.
Gross margin was 68.8% in the fourth quarter of 2019, compared with
71.8% in the fourth quarter of 2018. The slight decrease in gross
margin was primarily due to changes in the product and platform mix
of Babaka and a higher proportion of Acorn Fresh products, which
have a slightly lower margin than Babaka branded products, in the
product mix.
Total operating expenses in the fourth quarter of 2019 were
US$5.9 million, up 56.0% from
US$3.8 million in the fourth quarter
of 2018. The increase in operating expenses was due primarily to an
increase in selling and marketing expenses to support e-commerce
sales and higher general and administrative expenses associated
with higher staff expenses due to the expansion of Acorn Digital
Services. These expenses were partially offset by an increase in
other operating income due to increased revenues from Acorn Digital
Services and interest from the long-term loan to Cachet Hotels
& Resorts.
Income from continuing operations was US$0.4 million in the fourth quarter of 2019, as
compared to income from continuing operations of US$1.6 million in the fourth quarter of 2018.
Other income was US$1.5 million in
the fourth quarter of 2019, compared to other income of
US$2.0 million in the fourth quarter
of 2018. The fourth quarter of 2019 includes a $1.3 million gain from the sale of Zhuhai Acorn,
while the year-ago period includes a US$2.0
million gain from the sale of the Company's Bright Rainbow
subsidiary.
Net income from continuing operations was US$2.0 million in the fourth quarter of 2019.
This compares to net income from continuing operations of
US$3.7 million in the fourth quarter
of 2018. Net loss from discontinued operations, which reflects the
sale of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017 as
well as the Company's call center operations which were
discontinued in the third quarter of 2019 (refer to "Discontinued
Operations" discussion below), was US$0.3
million in the fourth quarter of 2019, compared to net
income from discontinued operations of US$0.3 million in the fourth quarter of 2018.
Net income attributable to Acorn was US$1.7 million in the fourth quarter of 2019.
This compares to net income attributable to Acorn of US$3.7 million in the fourth quarter of 2018.
Preliminary Full Year 2019 Financial Results
Total net revenues were US$37.5
million in 2019, up 49.5% from US$25.1 million in 2018, primarily due to an
increase in e-commerce sales of Babaka branded products as
well as other products, which was partially offset by lower
revenues of oxygen-generating products related primarily to the
sale of Zhuhai Acorn.
Cost of sales in 2019 was US$10.5
million, up 58.1% from US$6.6
million in 2018. The increase was attributable to increased
sales volume and net revenues.
Gross profit in 2019 was US$27.0
million, up 46.4% from US$18.5
million in 2018. Gross margin was 72.1% in 2019, compared
with 74.3% in 2018. The slight decrease in gross margin was
primarily due to changes in the product and platform mix of Babaka
and a higher proportion of Acorn Fresh products, which have a
slightly lower margin than Babaka branded products, in the product
mix.
Total operating expenses in 2019 were US$25.2 million, up 59.2% from US$15.8 million in 2018. The increase in
operating expenses was due primarily to an increase in selling and
marketing expenses to support e-commerce sales as well as higher
general and administrative expenses associated with higher staff
expenses due to the expansion of Acorn Digital Services and
office lease expense, which the Company began to incur starting in
December 2018 after the sale of its
former principal office. These expenses were partially offset by an
increase in other operating income due to increased revenues from
Acorn Digital Services and interest from the long-term loan to
Cachet Hotels & Resorts.
Income from continuing operations was US$1.8 million in 2019, as compared to income
from continuing operations of US$2.6
million in 2018.
Other income was US$7.1 million in
2019, primarily associated with a US$3.8 million gain on the sale of the
Company's former principal office in Shanghai to a third
party and a US$1.3 million gain
from the sale of Zhuhai Acorn. In 2018, other income was
US$32.1 million, which was primarily
due to a gain on the sale of the Company's Bright Rainbow
subsidiary.
Net income from continuing operations was US$9.2 million in 2019, which is primarily due to
the previously mentioned gain on the sale of the Company's former
principal office to a third party and the gain from the sale of
Zhuhai Acorn. This compares to net income from continuing
operations of US$35.1 million in
2018, which was primarily due to the previously mentioned gain from
the sale of Bright Rainbow.
Net loss from discontinued operations, which reflects the sale
of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017 as
well as the Company's call center operations which were
discontinued in the third quarter of 2019 (refer to "Discontinued
Operations" discussion below), was US$1.2
million in 2019, compared to a net loss from discontinued
operations of US$1.0 million in
2018.
Net income attributable to Acorn was US$7.8 million in 2019. This result compares to
net income attributable to Acorn of US$31.1
million in 2018.
As of December 31, 2019, Acorn's
cash and cash equivalents, with restricted cash, totaled
US$13.5 million. The cash balance at
the end of 2019 reflects the payment of cash dividends totaling
approximately US$4.5 million in
2019 and a drawdown of approximately US$4.9 million under the long-term loan to
Cachet Hotels & Resorts after the increase of loan capacity
from US$10 million to US$15 million. This compares to cash and
equivalents, with restricted cash, of US$20.2 million as of December 31, 2018. In February 2020, the Company sold an aggregate of
approximately US$3.4 million of
available-for-sale securities.
Discontinued Operations
In 2017, Acorn reached an agreement to sell a majority stake in
its HJX electronic learning products business ("HJX Business") to a
third-party investor and operator, allowing the Company to focus on
its core business. Acorn maintains a 37.5% stake in a joint venture
established with this third party. As a result of this transaction,
the Company is required by applicable accounting rules to treat the
historical operations of the wholly-owned HJX Business as
discontinued operations and the minority stake in the HJX Business
as equity in losses of affiliates in the consolidated statements of
operations for all periods presented, subject to the consolidation
of the HJX Business into the joint venture entity.
In the third quarter of 2019, the Company completed closing of its call center in Wuxi,
China. As a result, the Company is
required by applicable accounting rules to treat the historical
operations of the call center as discontinued operations for all
periods presented.
Sale of Oxygen-Generating Products Business
In the fourth quarter of 2019, the Company's wholly-owned
subsidiary, China DRTV, Inc. entered into an equity transfer
agreement to sell 100% of the equity interests in its wholly-owned
subsidiary, Zhuhai Acorn, which is engaged in oxygen-generating
products business, to an unrelated third-party for a purchase price
of US$1,450,000 in
cash. The sale was completed in the
fourth quarter of 2019 with a $1.3
million gain recorded and the receivables for the purchase
price were outstanding as of the date of this report.
Suspension November 2019 Take
Private Proposal
On February 14, 2020, Mr. Robert W. Roche, Chairman of
Acorn, delivered a letter (the "February 2020 Letter")
to the special committee of the board of directors of the Company
(the "Special Committee") informing the Special Committee that in
light of the uncertainties regarding the impact that the 2019
novel coronavirus outbreak will have on the economy, at this
time he and the shareholders of the buyer vehicle are not prepared
to pursue the acquisition of the Company (the "Acquisition") at a
purchase price of $0.975 per ordinary share
or $19.50 per American Depositary Share as set out in his
preliminary non-binding proposal letter dated November 4,
2019. Mr. Roche also stated in the February 2020 Letter
that he and the shareholders of the buyer vehicle remain interested
in continuing negotiations with the Special Committee regarding the
Acquisition. No additional terms or proposals have been discussed
at this time and there can be no assurance that negotiations will
continue or that a revised offer will be made, that any agreement
related to the Acquisition will be reached, or that the Acquisition
or any other similar transaction will be consummated.
The Special Committee conducted a meeting to consider next steps
in light of the February 2020 Letter. The Committee
determined that it would continue discussions with Mr. Roche as and
to the extent he was willing to do so, and evaluate next steps
based on the nature of these discussions and other factors, with no
assurance that any agreement related to the Acquisition will be
reached, or that the Acquisition or any other similar transaction
will be consummated.
About Acorn International, Inc.
Acorn International is a leading marketing and branding company
in China, leveraging a twenty-year direct marketing history to
monetize brand IP, content creation and distribution, and product
sales, through digital media in China. For more information
visit www.acorninternationalgroup.com.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements. These
statements constitute "forward-looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "anticipates," "believes,"
"estimates," "strives," "expects," "future," "going forward,"
"intends," "outlook," "plans," "target," "will," and similar
statements and include statements with respect to the future impact
of COVID-19 on the Company's business, as well as potential future
discussions with Robert Roche re a
possible future Acquisition or similar transaction. Such statements
are based on management's current expectations and current market
and operating conditions, and relate to events that involve known
or unknown risks, uncertainties, and other factors, all of which
are difficult to predict and many of which are beyond the Company's
control, including the extent and duration of the COVID-19 crisis,
Mr. Roche's willingness to engage in discussions re a possible
future Acquisition or similar transaction, and the nature of any
terms he proposes for the same, which may cause the Company's
actual results, performance, or achievements to differ materially
from those in these preliminary financial results and the
forward-looking statements. Further information regarding these and
other risks, uncertainties, or factors is included in the Company's
filings with the U.S. Securities and Exchange Commission. The
Company does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
Other factors that could cause forward-looking statements to
differ materially from actual future events or results include
risks and uncertainties related to: the Company's ability to
successfully improve or introduce new products and services,
including to offset declines in sales of existing products and
services; the Company's ability to stay abreast of consumer market
trends and maintain the Company's reputation and consumer
confidence; the Company's ability to execute and maintain a
successful market strategy; potential unauthorized use of the
Company's intellectual property; potential disruption of the
Company's manufacturing processes; increasing competition in
China's consumer market; the
Company's U.S. tax status as a passive foreign investment company;
and general economic and business conditions in China, as well
as potential friction between the U.S. and China associated with their current trade
dispute and related factors, which could potentially impact Acorn.
The financial information contained in this release should be read
in conjunction with the consolidated financial statements and notes
thereto included in the Company's 2018 annual report on Form 20-F
filed with SEC on April 30, 2019. For a discussion of other
important factors that could adversely affect the Company's
business, financial condition, results of operations and prospects,
see "Risk Factors" beginning on page 9 of the Company's Form 20-F
for the fiscal year ended December 31, 2018. The Company's
actual results of operations for the second quarter and first nine
months of 2019 are not necessarily indicative of its operating
results for any future periods. Any projections in this release are
based on limited information currently available to the Company,
which is subject to change. Although such projections and the
factors influencing them will likely change, the Company will not
necessarily update the information. Such information speaks only as
of the date of this release.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is
preliminary and subject to potential adjustments. Adjustments to
the consolidated financial statements may be identified when audit
work has been performed for the Company's year-end audit, which
could result in significant differences from this preliminary
unaudited condensed financial information.
Contact:
|
|
Acorn International,
Inc.
|
Compass Investor Relations
|
Mr. Martin
Key
|
Ms. Elaine Ketchmere, CFA
|
Phone
+86-21-5151-8888
|
Phone: +1-310-528-3031
|
Email:
ir@chinadrtv.com
|
Email: Eketchmere@compass-ir.com
|
www.chinadrtv.com
|
www.compassinvestorrelations.com
|
- Financial Tables Follow -
ACORN
INTERNATIONAL, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In US
dollars)
|
|
|
|
|
|
|
|
|
|
For the
three months
ended
|
|
For the
twelve months
ended
|
|
|
|
2018/12/31
|
|
2019/12/31
|
|
2018/12/31
|
|
2019/12/31
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Net
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
$
5,873,472
|
|
$
7,755,221
|
|
$
20,279,172
|
|
$
31,628,939
|
Distribution
sales
|
1,622,897
|
|
1,383,254
|
|
4,800,328
|
|
5,855,551
|
Total net
revenues
|
7,496,369
|
|
9,138,475
|
|
25,079,500
|
|
37,484,490
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
-1,618,963
|
|
-2,379,087
|
|
-5,068,524
|
|
-8,539,108
|
Distribution
sales
|
-496,164
|
|
-474,037
|
|
-1,559,922
|
|
-1,937,195
|
Total cost of
revenues
|
-2,115,127
|
|
-2,853,124
|
|
-6,628,446
|
|
-10,476,303
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
|
|
Direct
sales
|
4,254,509
|
|
5,376,134
|
|
15,210,648
|
|
23,089,831
|
Distribution
sales
|
1,126,733
|
|
909,217
|
|
3,240,406
|
|
3,918,356
|
Total gross
profit
|
5,381,242
|
|
6,285,351
|
|
18,451,054
|
|
27,008,187
|
|
71.8%
|
|
68.8%
|
|
74.3%
|
|
72.1%
|
Operating (expenses)
income
|
|
|
|
|
|
|
|
Other selling and
marketing expenses
|
-3,421,911
|
|
-4,598,921
|
|
-10,803,845
|
|
-18,179,109
|
General and
administrative expenses
|
-881,257
|
|
-1,988,333
|
|
-7,196,150
|
|
-9,289,440
|
Other operating
income, net
|
525,834
|
|
694,557
|
|
2,182,435
|
|
2,282,257
|
Total operating
(expenses) income
|
-3,777,333
|
|
-5,892,697
|
|
-15,817,560
|
|
-25,186,292
|
Income (loss) from
continuing operations
|
1,603,909
|
|
392,654
|
|
2,633,494
|
|
1,821,895
|
|
|
|
|
|
|
|
|
Interest
expense
|
-
|
|
-
|
|
-95
|
|
-
|
Interest
income
|
14,102
|
|
27,689
|
|
399,335
|
|
295,295
|
Other income
(expenses), net
|
2,037,033
|
|
1,547,831
|
|
32,094,726
|
|
7,070,293
|
Income (loss) from
continuing operations before income taxes and equity in losses of
affiliates
|
3,655,044
|
|
1,968,173
|
|
35,127,460
|
|
9,187,483
|
|
|
|
|
|
|
|
|
Income tax -
current
|
-275,047
|
|
-3,229
|
|
-3,018,150
|
|
-194,101
|
Income tax -
deferred
|
|
|
|
|
-
|
|
-
|
Income (loss) from
continuing operations before equity in losses of
affiliates
|
3,379,997
|
|
1,964,944
|
|
32,109,310
|
|
8,993,382
|
|
|
|
|
|
|
|
|
Discontinued
operations :
|
|
|
|
|
|
|
|
Income (loss)
from discontinued operations
|
289,591
|
|
-286,058
|
|
-986,563
|
|
-1,151,729
|
Income (loss) from
discontinued operations before equity in losses of
affiliates
|
289,591
|
|
-286,058
|
|
-986,563
|
|
-1,151,729
|
|
|
|
|
|
|
|
|
Equity in losses of
affiliates
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
3,669,588
|
|
1,678,886
|
|
31,122,747
|
|
7,841,653
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to non-controlling interests
|
882
|
|
-1,737
|
|
-4,436
|
|
-5,775
|
Net income (loss)
attributable to Acorn International, Inc.
|
$3,670,470
|
|
$1,680,623
|
|
$31,127,183
|
|
$7,847,428
|
ACORN
INTERNATIONAL, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(In US
dollars)
|
|
|
|
|
|
2018/12/31
|
|
2019/12/31
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$20,143,783
|
|
$13,461,368
|
Restricted
cash
|
76,243
|
|
75,543
|
Accounts receivable,
net
|
3,520,440
|
|
3,611,177
|
Inventory,
net
|
1,590,319
|
|
3,044,758
|
Other prepaid
expenses and current assets
|
7,936,100
|
|
9,173,941
|
Loan
receivable
|
3,597,392
|
|
3,754,735
|
Held-for-sale
assets
|
2,881,370
|
|
468,191
|
Assets to be
abandoned
|
579,644
|
|
16,295
|
Current
assets
|
40,325,291
|
|
33,606,007
|
|
|
|
|
Property and
equipment, net
|
660,157
|
|
559,964
|
Available-for-sale
securities
|
38,858,216
|
|
38,228,793
|
Loan to related
party
|
10,050,054
|
|
14,804,052
|
Right of use
assets
|
-
|
|
1,133,789
|
Other long-term
assets
|
243,236
|
|
270,745
|
Total
assets
|
$90,136,954
|
|
$88,603,350
|
|
|
|
|
Accounts
payable
|
2,057,539
|
|
3,172,263
|
Dividend
payable
|
174,658
|
|
133,405
|
Accrued expenses and
other current liabilities
|
12,726,641
|
|
7,881,924
|
Lease
Liability
|
-
|
|
663,285
|
Income taxes
payable
|
2,096,987
|
|
1,394,782
|
Deferred
revenue
|
174,826
|
|
68,798
|
Liabilities to be
abandoned
|
272,428
|
|
214,473
|
Current
liabilities
|
17,503,079
|
|
13,528,930
|
|
|
|
|
Lease
Liability
|
-
|
|
572,758
|
Deferred tax
liability, net
|
630,574
|
|
620,360
|
Total
liabilities
|
18,133,653
|
|
14,722,048
|
|
|
|
|
Ordinary
shares
|
918,844
|
|
918,844
|
Additional paid-in
capital
|
121,962,650
|
|
117,445,969
|
Statutory
reserve
|
8,350,141
|
|
8,350,141
|
Retained
earnings
|
(87,749,530)
|
|
(79,902,102)
|
Beginning
balance
|
(118,876,713)
|
|
(87,749,530)
|
Net income (loss)
attributable to Acorn
|
31,127,183
|
|
7,847,428
|
Appropriation of
statutory reserve fund
|
|
|
|
Accumulated other
comprehensive income
|
56,507,394
|
|
55,065,759
|
Treasury stock, at
cost
|
(28,320,324)
|
|
(28,320,324)
|
Total Acorn
International, Inc. shareholders' equity
|
71,669,175
|
|
73,558,288
|
|
|
|
|
Noncontrolling
interests
|
334,126
|
|
323,014
|
Total
equity
|
72,003,301
|
|
73,881,302
|
Total liabilities
and equity
|
$90,136,954
|
|
$88,603,350
|
View original
content:http://www.prnewswire.com/news-releases/acorn-international-reports-financial-results-for-the-fourth-quarter-and-full-year-2019-301022042.html
SOURCE Acorn International, Inc.