YIYANG, Jiangxi, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- Fuda Faucet Works, Inc. (OTC Bulletin Board: FUFW) ("Fuda Faucet" or "the Company"), a Chinese company engaged, through variable interest entities, in the business of developing, manufacturing, marketing and distributing mid-tier European style brass faucets, spouts and fittings to the international markets, today announced its financial results for the first quarter ended March 31, 2008.
First Quarter 2008 Highlights
-- Net revenues increased 141.7% year-over-year to $9.8 million
-- Gross profit increased 166% year-over-year to $2.1 million
-- Gross margin improved to 21.1% from 19.2% a year ago
-- Net income increased 148.5% year-over-year to $1.4 million, or $0.07
per diluted share
"Our stellar first quarter results are a continuation of the growth we have achieved since our inception in 1995. Over the last few years we have sold the vast majority of our products to the Middle East market, participating in the construction boom in that region," said Ms. Yiting Wu, CEO of Fuda Faucet. "We expect the growth in the Middle East market to continue and to that end we have established a strong distribution system in Dubai. We are also expanding sales of our products to Russia, where the growth potential is high."
Recent Highlights
-- Completed new production facility, tripling production capacity
-- Increased sales volume in Russia after Moscow Build '08 Exhibition
-- Launched new corporate website: www.jxfuda.com
-- Elected four independent directors and established audit and
compensation committees.
First Quarter 2008 Results
Total revenue for the first quarter ended March 31, 2008 totaled $9.8 million, up 141.7% from $4.0 million in the three months period ended March 31, 2007. The increase in total revenues was related mostly to sales to the Middle East market, the Company's largest market, through its retail and wholesale center in Dubai. During the first quarter of 2008, net sales to the Middle East market were $9.2 million, or an increase of 138.1%, for the same period prior year.
"We are delighted to maintain good working relationship with our existing customers through sales in Dubai. To further enhance our customer base, we attended Moscow Build '08 Exhibition in April to increase our exposure to potential customers. Our products are well-accepted in the target market because of our good quality and after-sale service," said Ms. Wu. "Starting sales in Russia from late 2007, we expect to see a significant growth this year."
Gross profit for the first quarter of 2008 was $2.1 million, an increase of 166.0% from $0.8 million for the same period of the prior year. Gross margin was 21.1% for the first quarter of 2008, compared to 19.2% for the prior year period. This increase is due to significant growth in sales volume, which results in reducing fixed cost per unit. Management expects that the normal level is around 20% in this industry.
Operating expenses were $0.4 million in the first quarter of 2008, compared to $0.1 million for the same period prior year. The primary reason for the increase in operating expenses was higher general and administrative expenses, which totaled $0.2 million, up from $0.1 million for the same period prior year. The increase in G&A expenses was mainly from the expansion of the Company's business, which increased expenses related to salaries, insurance, travel and office expenses. In addition, the Company incurred higher professional fees in the first quarter of 2008 related to being a public company. Selling expenses for the first quarter of 2008 rose slightly due to higher delivery expenses related to the growth in sales volume and the growth in international sales. Depreciation expenses also increased, due to an increase in fixed assets.
Operating income for the first quarter of 2008 totaled $1.7 million, a 164.9% increase from $0.6 million for the same period prior year. Operating margin improved to 17.3% in the first quarter of 2008, from 15.8% a year ago.
Net income for the first quarter of 2008 was $1.4 million, or $0.07 per fully diluted share, an increase of 148.5% from net income of $0.5 million, or $0.05 per fully diluted share, for the first quarter of 2007. Earnings per share were calculated using a diluted weighted share count of 20.1 million shares for the first quarter of 2008 and 10.6 million shares for the first quarter of 2007. The increase in weighted average shares includes the impact of the reverse merger and private placement in December 2007.
Financial Condition
At March 31, 2008, the Company had cash and cash equivalents of $2.8 million and working capital of $8.4 million. Accounts receivable were $4.5 million, and days sales outstanding were 55. Inventory was $9.3 million and days inventory outstanding was 103. Fuda Faucet expects to reduce inventory and collections in the second half of the year. At March 31, 2008, the Company had short-term bank loans of $5.9 million and stockholders' equity of $14.7 million.
The Company generated $3.5 million in cash flow from operating activities during the first quarter of 2008, primarily due to the collection of a receivable from a related party. Capital expenditures totaled $1.4 million, primarily related to the purchase of equipment and costs incurred due to construction.
Business Outlook
In April 2008, the Company commenced operations at its new, 229,703 square-foot manufacturing facility in Yiyang, Jiangxi Province, which increased production capacity from 1.2 million sets per year to 3.5 million sets per year. The facility is equipped with semi-automated, state of the art manufacturing equipment and will produce the same types of products that are currently being produced at the rest of the Company's manufacturing facilities.
"Our newly expanded production capacity will allow us to meet the growing demand for our European style brass faucets in the Middle East, Russia and Nigeria. In the coming months, we plan to increase our sales and distribution networks to cater to these growing markets," said Ms. Yiting Wu, CEO of Fuda Faucet.
About Fuda Faucet Works, Inc.
Jiangxi Yiyang Fuda Copper Co., Ltd. was founded by Ms. Wu Yiting, in Yiyang County, Jiangxi Province of the People's Republic of China, in November 1995. When Fuda started its operations in 1995, its business comprised of copper re-processing. In 2002, the Company started production of European style brass faucets and related spouts and fittings for the Chinese market. By 2004, Fuda started selling its products to international markets. Presently, Fuda Faucet engages in the business of developing, manufacturing, marketing and distributing a wide range of brass faucets and related spouts and fittings. The products are manufactured by Fuda for Fuda Faucet. The Company manufactures all its products in China and exports most of them to international markets. For more information, please visit the Company's web site http://www.jxfuda.com .
Safe Harbor Statement
This announcement contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the company's ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems; compliance with laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
-- FINANCIAL TABLES FOLLOW --
FUDA FAUCET WORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(US dollars)
Item Three Months Ended March 31,
2008 2007
Net sales 9,760,370 4,037,934
Cost of sales (exclusive of items
shown separately below) 7,700,215 3,263,348
Gross profit 2,060,155 774,586
Operating expenses:
Selling expenses 63,718 57,113
General and administrative 222,726 70,609
Officers' compensation 6,411 5,806
Depreciation and amortization 20,850 3,247
Consulting and professional fees 56,755 --
Total operating expenses 370,460 136,775
Operating income 1,689,695 637,811
Interest expense (110,912) (88,079)
Foreign exchange loss (212,639) --
Net income 1,366,144 549,732
Other comprehensive income
Foreign currency translation
adjustment 708,723 47,228
Comprehensive income 2,074,867 596,960
Earnings per common share
Basic 0.13 0.05
Diluted 0.07 0.05
Weighted average number of common
shares outstanding
Basic 10,725,440 10,564,647
Diluted 20,098,167 10,564,647
FUDA FAUCET WORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(US dollars)
Item March 31, 2008 December 31, 2007
(UNAUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents 2,764,643 169,319
Accounts receivable 4,535,417 487,471
Due from related parties - trade -- 6,996,322
Prepayments to suppliers -- 14,326
Inventories 9,288,386 8,260,479
Other current assets 234,981 251,619
Total current assets 16,823,427 16,179,536
Property, plant and equipment
Land use right 904,621 869,251
Buildings 1,228,457 1,180,427
Machinery and equipment 2,266,612 817,417
Automobiles 172,070 128,495
Office equipment 22,388 14,003
Property plant and equipment - total 4,594,148 3,009,593
Less: accumulated depreciation (876,527) (777,600)
Property plant and equipment - net 3,717,621 2,231,993
Construction in progress 2,033,518 1,867,513
Other long-term assets - idle assets
Machinery and equipment - net 344,804 331,324
Land use right - net 191,701 184,205
Total assets 23,111,071 20,794,571
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans 5,914,599 5,252,594
Accounts payable 628,102 686,114
Due to related parties - trade 1,289,647 1,189,152
Due to related parties - non-trade 321,592 869,802
Accrued expenses 237,939 112,280
Other payables 40,839 81,143
Total current liabilities 8,432,718 8,191,085
Total Liabilities 8,432,718 8,191,085
Commitments and Contingencies
Stockholders'equity
Preferred stock, 0.0000001 par
value; 20,000,000 shares
authorized; 3,090,909 share
issued and outstanding on
March 31, 2008 and December
31, 2007 -- --
Common stock - $0.0000001 par
value; 900,000,000 shares
authorized; 10,725,440 issued
and outstanding shares on March
31, 2008 and December 31, 2007 1 1
Additional paid-in capital 3,748,785 3,748,785
Surplus reserve 260,430 260,430
Retained earnings 9,119,729 7,753,585
Accumulated other comprehensive
income 1,549,408 840,685
Total stockholders'equity 14,678,353 12,603,486
Total liabilities and
stockholders'equity 23,111,071 20,794,571
FUDA FAUCET WORKS, INC.
CONDENSED CONSOLIDATED CASH FLOWS STATEMENTS
(UNAUDITED)
(US dollars)
Item Three Months Ended March 31,
2008 2007
Cash flows from operating activities:
Net income 1,366,144 549,731
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 98,927 38,443
(Increase) decrease in:
Accounts receivable (4,047,946) (282,650)
Due from related parties -
trade 6,996,322 --
Prepayments to suppliers 14,326 (68,416)
Inventories (1,027,907) (858,170)
Other current assets 16,638 (31,114)
Increase (decrease) in:
Accounts payable (58,012) 83,656
Due to related parties-trade 100,495 (165,610)
Advances from customers -- 586,633
Accrued expenses 125,659 41,176
Other payables (40,304) (39,327)
Net cash provided by (used in)
operating activities: 3,544,342 (145,648)
Cash flows from investing activities:
Purchase of fixed assets (1,379,708) (27,032)
Net cash used in investing activities (1,379,708) (27,032)
Cash flows from financing activities:
Proceeds from short-term bank loans 5,381,802 1,819,019
Repayment of short-term bank loans (4,884,271) (1,708,386)
Loans from related parties 2,800,128 --
Repayment to related parties (3,348,338) --
Net cash from financing activities (50,679) 110,633
Effect of exchange rate changes on
cash and cash equivalents: 481,369 (55,154)
Cash and equivalents
Net increase (decrease) in cash and
equivalents 2,595,324 (117,201)
Cash and equivalents, beginning of
period 169,319 380,714
Cash and equivalents, end of period 2,764,643 263,513
Supplemental Disclosures of Cash flow
Information:
Cash paid for interest 110,912 52,825
Cash paid for income taxes -- --
For more information, please contact:
Fuda Faucet Works, Inc.
Ms. Yiting Wu, CEO
Tel: +86-793-588-7178
Email: wyt1645@163.com
Web: http://www.jxfuda.com
CCG Elite Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgelite.com
