Diguang International Announces Fourth Quarter and Full Year 2009 Results

SHENZHEN, China, March 31 /PRNewswire-Asia-FirstCall/ -- Diguang International Development Co., Ltd. (OTC Bulletin Board: DGNG) ("Diguang" or the "Company") today announced financial results for the fourth quarter and the year ended December 31, 2009.

    Fourth Quarter Highlights
    -- Net revenue increased 65.0% year-over-year to $14.4 million
    -- Gross profit totaled $1.6 million, or 11.0% of sales, compared to gross
       loss of $1.0 million a year ago
    -- Net loss improved to $2.9 million, or $0.13 cents per diluted share,
       compared to a loss of $3.7 million, or $0.17 per diluted share, a year
       ago
    -- Non-GAAP net income was $0.4 million, or $0.02 per share, compared to a
       non-GAAP net loss of $1.6 million, or $0.07 per diluted share, a year
       ago
    -- In December 2009, Diguang commenced construction of its new production
       facility in Shenzhen to manufacture large sized LED back light products
       and LED TVs
    -- In October 2009, Diguang featured its LED lighting products at the Hong
       Kong International Lighting Fair
    -- In November 2009, Diguang featured its LED products at the China
       Hi-Tech Fair in Shenzhen

"Demand for our LED backlights continued to increase in the fourth quarter of 2009. As a result, revenue increased 7.1% over the third quarter of 2009 and jumped 65.0% on a year-over-year basis," said Mr. Song Yi, the President and Chief Executive Officer of Diguang. "In 2009, our product mix reflects our focus on the rapidly growing market for LED products. For the first time, sales of our LED products, including LED backlights, LED LCM, mini-notebooks, LED general lighting products and LED monitors, represented a majority of our total sales. We successfully introduced our LED TV backlight and LCM to major TV manufacturers and added 10 new customers, which accounted for approximately 19.0% of our total revenue for fiscal year 2009. During the year, we also delivered our 19" LED energy saving monitors, along with several LED general lighting products. While margin improved across LED product lines, most notably, large sized LED backlights recorded higher revenue and gross margin.

"We believe our LED TVs and TV assembly offerings will continue to gain momentum as consumers seek environmentally friendly, power-saving and superior quality products at affordable prices. This is especially true for the domestic market, and we are working to expand our network of agents within China," added Mr. Song

Highlights for the Three Months Ended December 31, 2009

Net revenue totaled approximately $14.4 million for the three months ended December 31, 2009, a significant increase of 65.0%, compared to $8.7 million for the three months ended December 31, 2008. On a sequential basis revenue increased 6.0% from $13.6 million in the third quarter of 2009 as a result of growing market demand for the Company's LED TV backlights and CCFL backlights. The fourth quarter of 2009 represents second consecutive quarter of expanded sales for the Company's traditional CCFL products and newly developed large size LED backlights and LED monitors, which benefited from continued economic recovery.

Gross profit for the fourth quarter of 2009 totaled $1.6 million, or 11.0% of net sales, compared with gross loss of $1.0 million for the same period of 2008. The turnaround in gross profit was largely attributable to upgrades to its small and mid size LED backlight products which generated negative margins in the year ago period, combined with the ability to generate high gross margin from sales of its large sized LED products. On a sequential basis, gross margin increased 4.0 percentage points from 7.0% in the third quarter of 2009.

Operating expenses totaled approximately $4.2 million for the fourth quarter of 2009, up 56.6% from $2.8 million in the fourth quarter of 2008. As a percentage of net revenue, fourth quarter 2009 total operating expenses amounted to 29.1%, compared to fourth quarter 2008 operating expenses at 56.6% of net revenue. This was largely attributable to a significant increase in R&D expenses as the Company aggressively upgraded its existing products and invested into product development initiatives and increase in selling expenses due to promotion activities for new products, which were partially offset by decline in general and administrative expenses as a result of management's disciplined efforts to control costs.

The Company's net loss attributable to common shares during the three months ended December 31, 2009 was $2.9 million, down from net loss attributable to common shares of $3.7 million for the three months ended December 31, 2008.

The loss per basic and diluted share was ($0.13) for the three months ended December 31, 2009, improving from loss per basic and diluted share of ($0.17) for the three months ended December 31, 2008.

Excluding non-cash items, net income for the fourth quarter of fiscal 2009 on a non-GAAP basis would have been $0.4 million, or $0.02 per basic and diluted share. Excluding non-cash items, net loss for the fourth quarter of 2008 on a non-GAAP basis would have been $1.6 million, or ($0.07) per basic and diluted share. Please see the reconciliation table below.

    Reconciliation of GAAP Net Income and Earnings per Share to Non-GAAP Net
    Income and Earnings per Share

                                Three Months Ended          Years Ended
                                    December 31,            December 31,
                                 2009         2008        2009        2008

    GAAP net income (loss)   (2,935,282)  (3,730,896) (7,200,452) (4,718,370)
    Non-cash items:
    Non controlling interest    202,927      (74,007)    (45,682)    195,925
    Depreciation                381,998      415,979   1,601,616   1,833,219
    Bad debt allowance          869,079      220,720     869,079     220,720
    Inventory provision       1,181,258    1,183,932   1,749,523   1,239,816
    Impairment of long-term
     investments                720,698      157,108     720,698     157,108
    Loss on disposal of
     assets                           2        3,726      30,489       3,726
    Share-based
     compensation               (20,305)     144,127     281,175     571,505
    Deferred tax assets              --       53,522      28,485      53,522
    Non GAAP net income
     (loss)                     400,375   (1,625,789) (1,965,069)   (442,869)

    GAAP net income (loss)        (0.13)       (0.17)      (0.33)      (0.21)
    Non-cash items:
    Non controlling interest       0.01        (0.00)      (0.00)       0.01
    Depreciation                   0.02         0.02        0.07        0.08
    Bad debt allowance             0.04         0.01        0.04        0.01
    Inventory provision            0.05         0.05        0.08        0.06
    Impairment of long-term
     investments                   0.03         0.01        0.03        0.01
    Loss on disposal of
     assets                        0.00         0.00        0.00        0.00
    Share-based
     compensation                 (0.00)        0.01        0.01        0.03
    Deferred tax assets            0.00         0.00        0.00        0.00
    Non GAAP net income
     (loss)                        0.02        (0.07)      (0.09)      (0.02)
    Weighted average shares
     outstanding -
     basic and diluted       22,200,822   22,072,000  22,072,000  22,155,882

Fiscal Year 2009 Results

Total revenue for 2009 was approximately $44.1 million, down 20.5% from $55.4 million in fiscal year 2008. Gross profit for 2009 was $3.6 million, down 25.1% from gross profit of $4.7 million a year ago. Gross margin was 8.1% for 2009, down from 8.6% for 2008. The Company recorded an operating loss of $7.0 million, compared with operating loss of $3.9 million in 2008. Net loss attributable to common shares for 2009 was $7.2 million, compared with net loss attributable to common shares of $4.7 million in 2008. Basic and diluted loss per share were ($0.33) for 2009 compared to ($0.21) in 2008.

Excluding non-cash items, net loss for 2009 on a non-GAAP basis would have been $2.0 million, or ($0.09) per share. Excluding non-cash items, net loss for 2008 on a non-GAAP basis would have been $0.4 million, or ($0.02) per share. Please see the reconciliation table above.

Financial Condition

As of December 31, 2009, Diguang had $6.2 million in cash and cash equivalents, $4.3 million in restricted cash and approximately $2.8 million in working capital. As of December 31, 2009, shareholders' equity was $51.7 million.

Recent Events

On March 9, 2010, Diguang's management team presented at the Rodman & Renshaw China Investment Conference in Beijing.

Business Outlook

Diguang continues to anticipate strong growth driven by increased demand in its LED backlight, LED TV, and general lighting product segments. According to DisplayBank's projections Global LED market will reach $14 billion in 2013, reflecting a five-year compound annual growth rate 18.7%. The Company has rolled out its 32", 42" and 52" LED TVs in small batches in the first quarter of 2010 and expects to deliver large orders in the second quarter of 2010. Diguang expects to launch its 24-inch ultra-thin monitor in the second quarter of 2010.

Diguang's new production facility in Shenzhen will be used to manufacture large size LED backlights and LED TVs. This new facility will house ten production lines with a total annual production capacity of 1.0 million units. The Company expects to complete construction in the third quarter of 2010 and anticipates the facility to commence production by the first quarter of 2011. With the additional capacity from the Shenzhen facility, the Company expects total capacity to expand to 6.6 million backlight units, 320,000 LED TV and monitor units, and 50,000 LED lighting units, an increase of 45.6%, 88.2% and 150%, respectively.

General lighting products, represent a longer term growth opportunity. According to DisplaySearch projections, the LED lighting market could reach $2 billion by 2013. Diguang employs sales agents to expand its geographic reach and has shipped samples of its LED general lighting products to the US, UK, France, Netherland and Singapore. The Company has received favorable response and is working on initial trial orders from customers in US, UK, and France.

The Company estimates fiscal 2010 revenue to be in the range of $60 million to $80 million.

"With distinguishing features such as superior quality, slimmer profiles, lower energy consumption and higher color contrast gaining consumers' attention, the global LED TV market is rapidly gaining momentum and we expect it to be a strong catalyst for our growth in the year ahead. We are also excited about the emerging LED general lighting segment with increasing government support and rising global environmental consciousness," commented Mr. Song. "Our new production facility in Shenzhen will enable us to capitalize on the long term growth opportunities in the LED industry. With strategically located manufacturing bases in China's vital electronics manufacturing regions, Diguang is well positioned to effectively meet increasing demand from both domestic and international customers."

Use of Non-GAAP Financial Measures

GAAP results for the three months and years ended December 31, 2009 and 2008 include non-cash expenses such as depreciation, share based compensation, bad debt allowance, inventory provisions, loss on the disposal of assets, and deferred tax assets. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non- GAAP financial information excluding the impact of these items in this release, which are non-GAAP net income and non-GAAP diluted earnings per share. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results related to the Company's historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these adjusted measures reflect the essential operating activities of the Company. Adjusted measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of each adjusted measures to the nearest GAAP measure appears in the table above.

Teleconference and Webcast Information

Management will host a conference call and webcast to the 2009 fourth quarter and year-end financial results. The conference call will take place at 9:00 a.m. Eastern Time on Thursday, April 1, 2010.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: [phone]. International callers should dial [phone]. When prompted, please enter the conference ID number 645 864 20.

A replay will be available for 14 days starting at 10:00 a.m. Eastern Time on Thursday, April 1, 2010, and can be accessed by dialing [phone]. International callers should dial [phone]. When prompted, please enter the conference ID number 645 864 20.

About Diguang International Development Co., Ltd.

Through its subsidiaries, Diguang develops and produces CCFL and LED backlights for a wide range of TFT-LCD products. A backlight is the typical light source of a liquid crystal display (LCD), with applications spanning televisions, computer monitors, cellular phones, digital cameras, DVDs and other home appliances. Leveraging its LED expertise, the Company also creates and markets energy-saving technologies and solutions for rapidly growing markets such as LED backlight monitors and LED general lighting. For more information, contact CCG Investor Relations directly or go to Diguang's website at http://www.diguangintl.com .

Safe Harbor Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Diguang's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. Diguang does not assume any obligation to update the information contained in this press release.

    For more information, please contact:

    Company Contact:
     Viola Tse
     Diguang International Development Co., Ltd.
     Phone: [phone]
     Email: [e-mail]

    Investor Relations Contact:
     Elaine Ketchmere, Partner
     CCG Investor Relations
     Phone: [phone]
     Email: [e-mail]
     Web:   http://www.ccgirasia.com


                               (financial tables follow)



                     DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
             CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                   FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2009
                                  (In US Dollars)

                           Three Months Ended             Years Ended
                               December 31,               December 31,
                            2009         2008          2009         2008
    Revenues:
    Revenues, net        14,415,893    8,734,623   $44,075,249  $55,430,680
    Cost of sales        12,824,018    9,696,293    40,523,868   50,690,610

    Gross profit          1,591,875     (961,670)    3,551,381    4,740,070

    Selling expense         683,374      589,551     2,336,476    1,854,369
    Research and
     development          1,563,326      327,636     3,049,703    1,163,830
    General and
     administrative       1,226,559    1,742,804     4,411,902    5,509,517
    Loss on disposing
     assets                       2      157,108        30,489        3,726
    Impairment loss         720,698           --       720,698      157,108
    Loss from
     operations          (2,602,084)  (3,778,769)   (6,997,887)  (3,948,480)

    Interest income
     expense, net           (81,369)     (89,062)     (367,128)    (259,666)
    Investment
     income (loss)               --        1,471           800       67,523
    Other income
     (loss)                 (37,478)     137,674       160,459     (190,513)

    Loss before
     income taxes        (2,720,931)  (3,728,686)   (7,203,756)  (4,331,136)

    Income tax
     provision               11,424       76,217        42,351      191,309

    Net loss             (2,732,355)  (3,804,903)   (7,246,107)  (4,522,445)

    Net income (loss)
     attributable to
     non-controlling
     interest               202,927      (74,007)      (45,682)     195,925

    Net income (loss)
     attributable to
     common shares       (2,935,282)  (3,730,896)  $(7,200,425) $(4,718,370)

    Weighted average
     common shares
     outstanding -
     basic               22,200,822   22,072,000    22,072,000   22,155,882

    Losses per share
     - basic                  (0.13)       (0.17)        (0.33)       (0.21)

    Weighted average
     common shares
     outstanding -
     diluted             22,200,822   22,072,000    22,072,000   22,155,882

    Losses per
     shares -
     diluted                  (0.13)       (0.17)        (0.33)       (0.21)



                     DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
                            CONSOLIDATED BALANCE SHEETS
                                  (In US Dollars)

                                                     December 31,
                                            2009                    2008
    ASSETS
    Current assets:
    Cash and cash equivalents            $6,190,513             $15,024,363
    Restricted cash                       4,341,112                      --
    Accounts receivable, net
     of allowance for
     doubtful accounts
     $ 655,893 and $1,529,505            13,972,086               9,944,208
    Inventories, net of
     provision $2,081,334
     and $3,519,124                       7,439,287               7,285,860
    Other receivables, net
     of provision $ 101,020
     and $ 69,032                           465,013                 535,493
    VAT recoverable                          82,497                 112,842
    Advance to suppliers                    900,328                 602,017
    Deferred tax asset                           --                  28,485

    Total current assets                 33,390,836              33,533,268

    Investment, net of
     impairment $779,302 and
     $ 1,500,000                                 --                 720,698
    Plant, property and
     equipment, net                      17,868,845              19,369,200
    Long-term prepayments                   439,502                      --

    Total assets                        $51,699,183             $53,623,166

    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
    Bank loans                          $10,213,683              $4,397,215
    Accounts payable                     15,446,721              15,643,476
    Advance from customers                  325,165                 561,282
    Accruals and other
     payables                             2,510,206               2,337,800
    Accrued payroll and
     related expense                        712,206                 626,277
    Income tax payable                      394,989                 401,260
    Amount due to related
     parties                                     --                 674,548
    Amount due to
     stockholders - current                 943,378               1,005,480
    Total current
     liabilities                         30,546,348              25,647,338

    Research funding
     advanced                               952,255                 644,925
    Total non-current
     liabilities                            952,255                 644,925

    Total liabilities                    31,498,603              26,292,263

    Equity
    Common stock, par value $0.001
     per share, 50 million shares
     authorized, 22,593,000 and
     22,593,000 shares issued,
     22,072,000 and 22,072,000 shares
     outstanding                             22,593                  22,593
    Additional paid-in
     capital                             20,881,635              20,600,460
    Treasury stock at cost                 (674,455)               (674,455)
    Appropriated earnings                   802,408                 802,408
    Accumulated deficit                  (7,644,254)               (443,829)
    Translation adjustment                4,338,891               4,503,022
    Total stockholders'
     equity                              17,726,818              24,810,199
      Non-controlling
       interest                           2,473,762               2,520,704
    Total equity                         20,200,580              27,330,903

    Total liabilities and
     stockholders' equity               $51,699,183             $53,623,166



                     DIGUANG INTERNATIONAL DEVELOPMENT CO., LTD.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents
                                  (In US Dollars)

                                             Years Ended December 31,
                                          2009                      2008
    Cash flows from
     operating activities:
    Net income                        $(7,246,107)              $(4,522,445)
    Adjustments to reconcile net
     income to net cash provided
     by (used in) operating
     activities:
    Depreciation                        1,601,616                 1,833,219
    Bad debts allowance                   869,079                   220,720
    Inventory provision                 1,749,523                 1,239,816
    Impairment of long-term
     investment                           720,698                   157,108
    Loss on disposing
     assets                                30,489                     3,726
    Share-based
     compensation                         281,175                   571,505
    Deferred tax asset                     28,485                    53,522
    Changes in operating
     assets and
     liabilities:
    Accounts receivable                (4,898,836)                3,079,557
    Inventory                          (1,903,493)               (1,073,437)
    Other receivables                      70,470                  (134,174)
    VAT recoverable                        30,347                   291,740
    Prepayments and other
     assets                              (298,422)                  586,062
    Accounts payable                     (196,458)               (4,012,725)
    Accruals and other
     payable                              258,294                (1,273,957)
    Advance from customers               (236,042)                   79,739
    Accrued interest
     payable to related
     parties                               64,629                        --
    Taxes payable                          (6,268)                  (23,295)

    Net cash used in
     operating activities              (9,080,821)               (2,923,319)

    Cash flows from
     investing activities:
    Purchase of fixed
     assets                              (160,094)               (2,607,743)
    Cash paid for
     acquisition of
     entities                            (109,670)               (1,194,520)
    Proceeds from disposal
     of fixed assets                       29,154                     9,161

    Net cash used in
     investing activities                (240,610)               (3,793,102)

    Cash flows from
     financing activities:
    Stock repurchase                           --                  (245,160)
    Due to related parties               (691,273)                 (727,161)
    Capital infused by
     minority interest in
     North Diamond                             --                   737,500
    Proceeds from
     short-term bank
     facilities                         5,813,568                 4,397,215
    Restricted cash pledged
     for import facilities             (4,341,112)                       --
    Prepaid deposit for
     long-term credit
     facilities                          (439,502)                       --
    Research funding
     advanced                             307,731                   391,882

    Net cash received from
     financing activities                 649,412                 4,554,276

    Effect of changes in
     foreign exchange rates              (161,831)                  935,781

    Net increase (decrease)
     in cash and cash
     equivalents                       (8,833,850)               (1,226,364)

    Cash and cash
     equivalents, beginning
     of the year                       15,024,363                16,250,727

    Cash and cash
     equivalents, end of
     the year                          $6,190,513               $15,024,363

SOURCE Diguang International Development Co., Ltd.

Copyright h 31 PR Newswire