-- Company Reports 2007 First Quarter Revenue of $11.7 million and Net
Income of $0.9 million
-- On April 20, 2007 Company Announced the Planned Acquisition of
Zhongshan City Juxian Gas Oven Co., Ltd which is Expected to Expand the
Company's Product Portfolio and Customer Base
LOS ANGELES, May 17 /Xinhua-PRNewswire/ -- Home System Group (OTC
Bulletin Board: HSYT) based in Guangdong Province, PRC, an International
manufacturer and distributor of home appliance products to major global
retailers, today announced first quarter 2007 financial results. Due to both
Oceanic Well Profit and Oceanic International being new business entities,
first quarter 2007 results are not applicable for comparison purposes in
relation to the first quarter of 2006.
For the quarter ended March 31, 2007, revenues were $11.7 million
resulting from both the manufacturing and distribution of home appliance
products, including BBQ gas grills, home water pumps, blenders, electric fans,
heaters, and other electronic and environmentally friendly products made in
China. These products are then sold through major distributors who have
relationships with several large retailers based in the U.S., Europe and
Australia. The Company's January 31, 2007 acquisition of Oceanic Well Profit
contributed approximately $4.2 million in revenues, representing 36 percent of
total first quarter sales. The remaining $7.5 million in revenue was generated
from the Company's Oceanic International, Ltd distribution business.
During the first quarter, the Company's top three BBQ stainless steel
grill products had retail selling prices between $400 and $569, with these
three products representing the majority of total revenues respectively for
Oceanic Well Profit. The Company's largest customer was Hengbao Import and
Export Company, representing 66 percent of revenue, which sells the Company's
products to large retailers.
Cost of goods sold for the quarter was $10.2 million, yielding gross
profits of $1.6 million and gross margins of 13.3 percent. General and
administrative expenses were $0.6 million.
Operating income for the quarter totaled $1.0 million with a related
operating margin of 8.6 percent. Net income was $0.9 million with earnings per
share of $0.02 based on 42.5 million diluted weighted shares outstanding.
"While the tremendous growth in the domestic Chinese economy is putting an
upward bias on raw material prices, including steel, management expects that
through improved procurement capabilities, increased purchasing power, prudent
cost controls, and higher manufacturing revenue as a component of total sales,
overall margins should improve through the remainder of 2007," commented Mr.
Li Wei Qiu, CEO and Chairman of Home System Group.
"In addition, management expects Oceanic Well Profit, which currently has
$75 million in annual production capacity, to significantly contribute to Home
System Group's revenues during 2007. Oceanic Well Profit recently embarked on
a new expansion plan to significantly increase its overall production capacity
which will accommodate future growth and support new product introductions."
Net cash provided by operating activities for the first quarter of 2007
totaled $7.3 million and resulted from a number of factors, the most
significant being an asset and liability adjustment associated with the
acquisition of Oceanic Well Profit on January 31, 2007 in addition to positive
net income, decreased accounts receivable and strong working capital
management during the quarter. Current assets were $17.6 million and the
Company maintained a healthy current ratio of 1.21 to 1. Shareholders' equity
totaled $6.7 million.
"Subsequent to the end of the quarter and consistent with our previously
stated goal to develop a vertically integrated manufacturing and distribution
platform, we announced a purchase agreement for Zhongshan City Juxian Gas Oven
Co., Ltd. We believe this acquisition, which is expected to close by June 30,
2007, will complement our current production capabilities by adding several
moderately priced BBQ gas grills to our product portfolio while expanding both
our customer base and geographic presence," Mr. Li Wei Qiu further commented.
The Company was founded in 2001 and producers a broad range of stainless
steel and metallic BBQ gas grills and ovens, with retail price points between
$100 and $500, in addition to electric and gas heaters. The 100,000 square
foot facility is located in Zhongshan City, which is part of the Guangdong
Province, is approximately forty kilometers from Home System's main
manufacturing facility.
Zhongshan City Juxian Gas Oven Co., Ltd reported approximately $18 million
in revenues during 2006 with operating margins of approximately 8.5 percent.
Currently, the Company's total operating capacity is approximately 120,000 BBQ
gas grill ovens and 100,000 heaters. Prior to the acquisition, management of
Juxian expected to generate approximately $36 million in revenue during 2007
on a standalone basis. Home Systems' management expects that post the
acquisition closing, it will be able to expand the Company's overall
production capabilities while improving operating margins and profitably.
"This acquisition provides an opportunity to add economy priced BBQ gas
grills into our product portfolio. We have the capability to significantly
expand the overall production capacity by utilizing our larger manufacturing
facility and lowering the associated costs of goods sold through stronger
purchasing power. We also plan to leverage our extensive research and
development platform for new product introductions while capitalizing on
incremental cross selling opportunities with Juxian's current customer base,"
Mr. Li Wei Qiu concluded.
As of May 14, 2007 the registrant had approximately 62.5 million shares of
common stock outstanding.
About Home System Group
Headquartered in Hong Kong, China, Home System Group, through its wholly
owned distributor Oceanic International (Hong Kong), Ltd. (OCIL) and Oceanic
Well Profit produces and distributes home appliances, including stainless
steel gas grills, residential water pumps, electronic fans, fruit processors,
and other electrical appliances to retailers in the U.S., Europe and Australia.
The Company became public through a reverse merger and received its stock
trading symbol on October 4, 2006. Please visit the company website at:
http://www.homesystemgroup.com.
Safe Harbor Statement:
Certain statements in this news release may contain forward-looking
information about Home System Group, Inc.'s business and products within the
meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the
Securities Exchange Act of 1934, and are subject to the safe harbor created by
those rules. The actual results may differ materially depending on a number of
risk factors including, but not limited to, the following: general economic
and business conditions, product development, shipments to end customers,
market acceptance of new and existing products, additional competition from
existing and new competitors, changes in technology, and various other factors
beyond its control. All forward-looking statements are expressly qualified in
their entirety by this Cautionary Statement and the risks factors detailed in
the Company's reports filed with the Securities and Exchange Commission. Home
System Group undertakes no duty to revise or update any forward-looking
statements to reflect events or circumstances after the date of this release.
For more information, please contact:
Investor Contact:
Michelle Zheng
Home Systems Group
Tel: +1-213-223-2277
Email: michelle@homesystemgroup.com
Matt Hayden
HC International
Tel: +1-858-704-5065
Email: matt@haydenir.com
The financial information stated above and in the tables below has been
abstracted from the Company's Form 10-Q for the quarter ended March 31, 2007
filed with the Securities and Exchange Commission and should be read in
conjunction with the information provided therein.
HOME SYSTEM GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2007 AND DECEMBER 31, 2006
March 31, December 31,
2007 2006
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 962,101 $ 6,012
Accounts receivable 5,549,652 3,212,160
Prepaid expense 589,737 -
Inventory 6,220,984 2,334,744
Trade deposits 1,183,420 112,824
Employee advances - 4,391
Due from stockholder 839,940 -
Due from related party 2,248,066 -
17,593,900 5,670,131
PROPERTY AND EQUIPMENT - Net 3,690,234 3,684,326
TOTAL ASSETS $ 21,284,134 $ 9,354,457
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loan $ 1,633,284 $ -
Accounts payable 11,940,244 2,353,705
Accrued expenses 696,694 389,455
Taxes payable 219,972 122,262
Due to directors 1,280 -
Due to related party 5,000 2,519,898
Due to stockholder 71,934 -
TOTAL LIABILITIES 14,568,408 5,385,320
STOCKHOLDERS' EQUITY
COMMON STOCK - $0.001 par value;
200,000,000 shares authorized,
62,448,000 shares and
42,500,000 shares issued and
outstanding 62,448 42,500
PAID-IN CAPITAL 6,667,979 3,709,025
NOTE RECEIVABLE FOR STOCK ISSUANCE (900,000) -
RETAINED EARNINGS 745,881 118,249
CUMULATIVE TRANSLATION ADJUSTMENT 139,418 99,363
TOTAL STOCKHOLDERS' EQUITY 6,715,726 3,969,137
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 21,284,134 $ 9,354,457
See accompanying notes to consolidated financial statements.
HOME SYSTEM GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007
(UNAUDITED)
NET SALES $ 11,716,767
OPERATING EXPENSES
Cost of net sales 10,158,754
General and administrative expenses 555,221
10,713,975
INCOME FROM OPERATIONS 1,002,792
OTHER INCOME (EXPENSE)
Finance costs -
Interest income 181
181
INCOME BEFORE INCOME TAXES 1,002,973
INCOME TAXES - CURRENT 71,092
NET INCOME $ 931,881
BASIC AND DILUTED EARNINGS PER SHARE $ 0.02
