Acorn International Reports Fourth Quarter and Full Year 2011
Unaudited Financial Results
SHANGHAI, China, March 20, 2012 - Acorn International, Inc.
(NYSE: ATV) ("Acorn" or the "Company"), a
media and branding company in China engaged in developing,
promoting and selling products through extensive direct sales
and distribution networks, today announced its unaudited
financial results for the quarter and full year ended
December 31, 2011.
Summary Results for the Fourth Quarter 2011:
• Net revenues were $87.5 million, an increase of 23.5%
compared to $70.8 million in the fourth quarter of
2010.
• Gross profit was $38.7 million, an increase of 84.7%
compared to $21.0 million in the fourth quarter of
2010.
• Gross margin was 44.3%, compared to 29.6% in the same
period of 2010.
• Operating loss was $1.8 million, compared to an
operating loss of $11.9 million in the fourth quarter of
2010.
• Net loss from continuing operations was $0.9 million,
compared to a net loss of $9.4 million for the fourth quarter
of 2010.
• Net loss attributable to Acorn was $1.0 million,
compared to a net loss of $8.7 million in the fourth quarter
of 2010.
• Diluted loss per American Depositary Share ("ADS")
from continuing operations were $0.03, compared to a loss per
ADS of $0.29 for the fourth quarter of 2010.
2 / 11
Summary Results for the Full Year 2011:
• Net revenues were $362.1 million, an increase of
23.5% compared to $293.2 million for 2010.
• Gross profit was $156.1 million, an increase of 40.0%
compared to $111.5 million for 2010.
• Gross margin was 43.1%, compared to 38.0% for
2010.
• Operating income was $1.1 million, compared to an
operating loss of $12.8 million for 2010.
• Net income from continuing operations was $5.0
million, compared to a net loss of $7.2 million for
2010.
• Net income attributable to Acorn was $5.1 million,
compared to a net loss of $6.4 million for
2010.
• Diluted earnings per ADS from continuing operations
were $0.17 for 2011, compared to diluted loss per ADS from
continuing operations of $0.22 for 2010.
"2011 was a year of transformation for Acorn. We made good
progress in our strategy to develop Acorn into a media and
branding company supported by strong media resources with a
portfolio of high quality, proprietary branded products.
Mobile handsets sales were the largest contributor to our
revenues during 2011, due to the sustained market recognition
of the Gionee A320 model. We successfully introduced five new
products for full scale sales and marketing programs in 2011,
including the Yierjian abdominal trainer, which quickly
became our fastest growing product and will be one of our
major growth drivers in the future," said Mr. Don Yang, CEO
and President of Acorn. "In 2011, we achieved more effective
media spending, thereby generating strong interest in our
brands, improving our conversion rate and driving repeat
sales. Revenues generated through our other direct sales
platforms increased 45.3% and accounted for more than half of
total direct sales. At the same time, we remained financially
prudent, improved our core operations and controlled our
costs, returning Acorn to profitability at the operating
level and generating $5.1 million in net income for our
shareholders."
Business Results for the Fourth Quarter of 2011:
• Sales of mobile handsets were the best selling product
line, generating revenues of $27.1 million, representing
30.9% of total revenues, in the fourth quarter of 2011.
Mobile phone sales declined 27.6% from the fourth quarter of
2010 due to less media spending and slower than expected
Gionee W100 cell phone sales. Sales of collectibles rose
61.1% year-over-year to reach $11.3 million in the fourth
quarter of 2011, due to increased market demand.
• Sales of fitness products (mainly Yierjian abdominal
trainer introduced in September 2011) performed well in 2011,
generating $10.2 million in revenue. The Company expects the
fitness product line to become one of its major revenue
drivers in 2012.
• Other direct sales platforms, represented by third-party
bank channels, outbound calls, catalogs and Internet sales
remained a key growth driver of the Company's direct sales
business. Other direct sales increased 29.7% for the fourth
quarter 2011 compared to the fourth quarter 2010. The growth
in other direct sales was primarily due to growth in
3 / 11
outbound sales calls, which increased 68.8% in the fourth
quarter of 2011 compared to the same period last year,
partially offset by a 26.1% decrease in third party bank
channel sales.
Financial Results for the Fourth Quarter of 2011:
Total net revenues were $87.5 million for the fourth quarter
2011, an increase of 23.5% from $70.8 million for the fourth
quarter last year. Direct sales contributed to 83.0%, or
$72.6 million, of the total net revenues for the fourth
quarter of 2011, an increase of 26.9% from $57.2 million for
the same period last year, mainly due to sales of cell
phones, collectibles and fitness products.
Distribution sales net revenues increased 9.3% year-over-year
to $14.9 million from $13.6 million for the fourth quarter of
2010, primarily due to stronger sales of M8 tablet computer,
an Ozing series electronic learning product, which commands a
higher selling price and a higher margin.
The table below summarizes the gross revenues of the Company
for the fourth quarter of 2010 and
2011, broken down by product categories:
2011 Q4
$'000
Sales
%
2010 Q4
$'000
Sales
%
Cell phones
27,091
30.89
37,438
52.77
Electronic learning products
12,616
14.38
9,515
13.41
Collectible products
11,296
12.88
7,011
9.88
Fitness products
10,181
11.61
107
0.15
Other products
9,885
11.27
4,900
6.92
Consumer electronics
7,902
9.01
4,428
6.24
Cosmetics
5,640
6.43
5,311
7.49
Health products
3,095
3.53
2,230
3.14
Total gross revenues
87,706
70,940
Cost of sales for the fourth quarter of 2011 was $48.8
million, a 2.2% decrease from $49.8 million for the fourth
quarter of 2010, primarily due to a lower percentage of sales
in the quarter contributed by cell phones, which generally
have higher product costs.
Gross profit for the fourth quarter of 2011 was $38.7
million, an increase of 84.7% compared to
$21.0 million for the fourth quarter of 2010. Gross margin
was 44.3% in the fourth quarter of 2011, compared to 29.6% in
the same period in 2010. The increase in gross margin was
largely due to a shift in product mix to include less cell
phone sales in certain distribution channels, which generally
have lower margins. In addition, the lower margin in the
fourth quarter of 2010 also resulted from certain write-downs
of Ozing and cell phone inventories the Company recorded in
such period, as well as a decrease in gross margin from
cosmetics sales due to the discontinuation of Softto hair
treatment products.
4 / 11
Advertising expenses were $17.4 million for the fourth
quarter of 2011, up 18.7% from $14.6 million for the fourth
quarter of 2010. Gross profit over advertising expenses, a
benchmark Acorn uses to measure return on multiple sales
platforms, was 2.23 in the fourth quarter of 2011, up from
1.43 in the fourth quarter of 2010.
Other selling and marketing expenses increased 39.9% to $16.5
million from $11.8 million for the fourth quarter of 2010.
The increase was mainly due to the increase in delivery cost,
salaries and commissions for call center personnel.
General and administrative expenses were $9.8 million for the
fourth quarter of 2011, a 26.4% increase from $7.8 million in
the fourth quarter of 2010. The increase was largely due to a
$2.5 million increase in bad debt related to the receivable
from a local delivery company.
Other operating income, net, was $3.1 million for the fourth
quarter of 2011, compared to $1.4 million in the fourth
quarter of 2010. The increase was primarily due to trademark
licensing and subsidy income.
As a result of all of the items above, operating loss was
$1.8 million, compared to an operating loss of $11.9 million
in the fourth quarter of 2010.
Other income, primarily from interest income and investment
income, was $1.0 million, an increase of 81.8% compared to
$0.5 million in the fourth quarter of 2010.
Net loss from continuing operations was $0.9 million,
compared to a net loss of $9.4 million for the fourth quarter
of 2010.
Net loss attributable to Acorn was $1.0 million, compared to
a net loss of $8.7 million in the fourth quarter of 2010.
Diluted loss per American Depositary Share ("ADS") from
continuing operations were $0.03, compared to a loss per ADS
of $0.29 for the fourth quarter of 2010.
As of December 31, 2011, Acorn's cash and cash equivalents,
including restricted cash and short-term investments, totaled
$122.7 million, compared to $104.2 million as of December
31,
2010.
Subsequent Events
The Company named four Vice Presidents, Mr. Lifu Chen, Mr.
Rong Wang, Mr. Yongqiang Zhu, and Mr. David Meng to
strengthen critical areas of its operational structure,
effective in December 2011. In addition, the Company
appointed a new financial controller, Mr. Geoffrey Gao,
effective in February 2012.
5 / 11
The Company entered into a letter of intent in connection
with the cooperation with Guthy Renker, one of the world's
most reputable direct marketing companies in March 2012. For
more information about Guthy Renker, please visit
www.guthy-renker.com.
Fiscal Year 2011 Results:
Total net revenues were $362.1 million for the full year
2011, an increase of 23.5% from $293.2 million for 2010.
Direct sales contributed 80.5%, or $291.5 million, of the
total net revenues for the full year 2011, an increase of
48.9% from $195.8 million for 2010, mainly due to increased
sales of Gionee branded cell phones and collectibles.
Distribution sales net revenues declined 27.6% year-over-year
to $70.5 million from $97.4 million for 2010, primarily due
to the decreased sales of Yukang branded cell phones and auto
products in distribution channels. In addition, sales of
Ozing also decreased due to an overall slowdown in the
electronic learning products market in 2011.
The table below summarizes the gross revenues of the Company
for year 2010 and 2011, broken down by product categories:
Year 2011
$'000
Sales
%
Year 2010
$'000
Sales
%
Cell phones
165,958
45.72
125,074
42.61
Electronic learning products
62,539
17.23
69,535
23.69
Collectible products
33,194
9.14
18,040
6.15
Other products
25,601
7.05
17,503
5.96
Cosmetics
24,857
6.85
26,233
8.94
Consumer electronics
24,249
6.68
14,035
4.78
Health products
13,348
3.68
12,950
4.41
Fitness products
12,064
3.32
403
0.14
Auto products
1,189
0.33
9,753
3.32
Total gross revenues
362,999
293,526
Cost of sales for 2011 was $205.9 million, a 13.3% increase
from $181.7 million last year. The overall increase was
primarily driven by increase in sales and a shift in product
mix.
Gross profit for 2011 was $156.1 million, an increase of
40.0% compared to $111.5 million last year. Gross margin was
43.1% for 2011, compared to 38.0% last year.
Advertising expenses were $68.6 million for 2011, compared to
$58.5 million last year. Gross profit over advertising
expenses, a benchmark Acorn uses to measure return on
multiple sales platforms, was 2.28 in 2011, up from 1.91 last
year.
6 / 11
Other selling and marketing expenses increased 38.0% to $59.9
million from $43.4 million last year, primarily due to
delivery costs; salaries and commissions for call center
personnel.
General and administrative expenses were $31.7 million for
2011, a 24.6% increase from $25.4 million for 2010. The
increase was largely due to a $4.7 million increase in bad
debt related to the receivable from a local delivery company
and higher consulting service expenses.
Other operating income, net, was $5.1 million for 2011,
compared to $3.0 million last year.
As a result of all of the items above, operating income was
$1.1 million, compared to an operating loss of $12.8 million
last year.
Other income, primarily from interest income and investment
income, was $7.1 million, compared to
$4.0 million last year.
Net income from continuing operations was $5.0 million,
compared to a net loss of $7.2 million last year.
Net income attributable to Acorn was $5.1 million, compared
to a net loss of $6.4 million last year. Diluted earnings per
ADS from continuing operations was $0.17 for 2011, compared
to diluted loss
per ADS from continuing operations of $0.22 last year.
Fiscal Year 2012 Business Outlook:
In fiscal 2012, the Company will continue to increase media
spending on the direct sales channel and focus on promoting
featured products. Acorn intends to further diversify its
product offerings and customer base, encourage repeat
purchases by existing customers and create opportunities for
recurring revenue. At the same time, the management team
remains focused on controlling costs and continuously
improving operations to enhance bottom line performance.
For the full year 2012, the Company expects revenue between
$380 million and $400 million and net income to be between $6
million and $8 million.
These estimates are subject to change. Also, Acorn reminds
investors that its operating results in each period vary
significantly as a result of the mix of products sold in the
period and the platforms through which they are sold.
Therefore, the operating results for interim periods are not
necessarily indicative of results that may be expected for
any other interim period or for the full year. Consequently,
in evaluating the overall performance of Acorn's multiple
sales platforms in any period, management also considers
metrics such as operating margin and gross profit return on
advertising expenses.
Conference Call Information
The Company will host a conference call at 8:00 a.m. ET on
March 20, 2012 (8:00 p.m. Beijing
7 / 11
Time) to review the Company's financial results and
answer questions. You may access the live interactive call
via:
-- 1866 549 - 1292 (U.S. Toll Free)
-- 800 876 8626 (China Toll Free)
-- +852 3005 2050 (International)
-- Passcode: 551043#
Please dial-in approximately 10 minutes in advance to
facilitate a timely start.
A replay will be available for 30 days immediately after the
call ends and may be accessed via:
-- +1866 753 0743 (U.S. Toll Free)
-- +852 3005 2020 (International)
-- Conference Reference: 159399#
A live and archived webcast of the call will be available on
the Company's website at http://ir.chinadrtv.com
. To listen to the live webcast, please go to
the Company's website at least fifteen minutes prior to
the start of the call to register, download and install any
necessary audio software.
About Acorn International, Inc.
Acorn is a media and branding company in China, operating one
of China's largest TV direct sales businesses in terms of
revenues and TV air time, and other direct sales platforms
and a nationwide distribution network. Acorn's TV direct
sales platform consists of airtime purchased from both
national and local channels. Acorn's other direct sales
platforms include third-party bank channels, outbound calls,
catalogs and Internet. Acorn has built a proven track record
of developing, promoting and selling proprietary-branded
products, as well as products from established third parties.
For more information, please visit http://ir.chinadrtv.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This press release contains "forward-looking statements,"
including, among other things, Acorn's anticipated operating
results for 2012 and related breakdown of product sales and
trends; Acorn's efforts to optimize its media spending and
product mix; the expected revenue contribution by, and
potential growth of, the Yierjian product; Acorn's ability to
further diversify its customer base, to attract repeat
purchases and to create opportunities for recurring revenues
and Acorn's ability to achieve effective cost control and
improve its operations. These forward-looking statements are
not historical facts but instead represent only the Company's
belief regarding future events, many of which, by their
nature, are inherently uncertain and outside of the Company's
control. The Company's actual results and financial condition
and other circumstances may differ, possibly materially, from
the anticipated results and financial condition indicated in
these forward-looking statements. Acorn's business may not
improve in the remainder of 2012 and its strategies and
related efforts to grow revenues and margins by means of
introducing new mobile handsets, optimize media
8 / 11
spending and product mix and grow and sustain sales for its
mobile handsets, collectibles, cosmetics and electronic
learning products may not succeed and it may fail to meet its
operating results expectations. In particular, the operating
results of the Company for any period are impacted
significantly by the mix of products sold by the Company in
the period and the platforms through which they are sold,
causing the operating results of the Company to fluctuate and
making them difficult to predict. In addition, a substantial
portion of the Company's revenues was generated from the
sales of "Gionee" branded mobile handsets. The Company may
not be able to maintain the sales and margin of such products
at current level in the event that there is a change in the
customers' preference, which may results in a material
adverse impact on the Company's results of operations and
financial conditions.
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,
including to offset declines in sales of existing products;
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, continued access to and effective
usage of TV advertising time and pricing related risks;
relevant government policies and regulations relating to TV
media time and TV direct sales programs, including the new
SARFT regulations and actions that may make TV media time
unavailable to the Company or require the Company to suspend
or terminate a particular TV direct sales program; rising
costs in key components of the Company's products, such as
flash memory, 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. 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
2010 annual report on Form 20-F filed with Securities and
Exchange Commission on April 27, 2011. 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 5 of the Company's Form 20-F for the fiscal year ended
December 31, 2010. The actual results of operations of the
Company for the fourth quarter and full year of 2011 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 financial information set forth above is unaudited and
subject to adjustments. Adjustments to the financial
statements may be identified when audit work is performed for
the year-end audit, which could result in significant
differences from this unaudited financial information.
9 / 11
ACORN INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In US dollars)
December 31, 2010
December 31, 2011
Assets
Current assets:
Cash and cash equivalents
91,667,392
111,180,139
Restricted cash
2,225,882
1,556,852
Short-term investments
10,267,178
9,993,720
Accounts receivable, net
15,299,525
16,693,959
Notes receivable
1,645,263
-
Inventory
22,671,041
32,888,645
Prepaid advertising expenses
8,433,014
11,654,922
Other prepaid expenses and current assets, net
9,599,082
9,928,245
Deferred tax assets, net
4,188,288
3,465,795
Total current assets
165,996,665
197,362,277
Prepaid land use rights
7,423,358
8,105,061
Property and equipment, net
19,307,886
29,803,901
Acquired intangible assets, net
2,560,753
2,126,596
Long-term investments
8,681,902
-
Investment in affiliates
7,911,525
6,794,955
Other long-term assets
2,749,568
1,482,881
Total assets
214,631,657
245,675,671
Liabilities and equity
Current liabilities:
Accounts payable
12,854,188
21,023,807
Accrued expenses and other current liabilities
11,261,381
18,910,178
Notes payable
2,212,292
4,411,840
Income taxes payable
3,678,693
3,603,813
Dividend payable
15,177
467
Total current liabilities
30,021,731
47,950,105
Deferred tax liabilities
790,627
831,006
Total liabilities
30,812,358
48,781,111
Equity
Acorn International Inc. shareholders' equity:
Ordinary shares
939,047
945,666
Additional paid-in capital
159,630,208
160,632,659
Statutory reserve
5,195,416
5,442,682
Retained earnings
5,641,597
10,517,590
Beginning balance
14,334,317
11,561,270
Net lossattributable to Acorn
(8,692,720)
(1,006,476)
Appropriation of statutory reserve fund
-
(37,204)
10 / 11
Accumulated other comprehensive income
22,480,106
30,320,856
Treasury stock, at cost
(11,463,946)
(11,463,946)
Total Acorn International Inc. shareholders'
equity
182,422,428
196,395,507
Non-controlling interests
1,396,871
499,053
Total equity
183,819,299
196,894,560
Total liabilities and equity
214,631,657
245,675,671
ACORN INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In US
dollars, except share data)
3 Months Ended December 31 12 months Ended December 31
2010 2011 2010 2011
Gross revenues
Direct sales
57,314,614
72,791,319
196,098,603
292,290,123
Distribution sales
13,625,193
14,915,139
97,427,674
70,708,535
Total
70,939,807
87,706,458
293,526,277
362,998,658
Sales tax
Direct sales
(132,446)
(201,487)
(277,295)
(765,614)
Distribution sales
(7,658)
(35,387)
(7,797)
(175,131)
Total
(140,104)
(236,874)
(285,092)
(940,745)
Net revenues
Direct sales 57,182,168 72,589,832 195,821,308 291,524,509
Distribution sales 13,617,535 14,879,752 97,419,877
70,533,404
Total 70,799,703 87,469,584 293,241,185 362,057,913
Cost of revenues
Direct sales (35,488,102) (39,093,846) (106,990,383)
(160,359,667) Distribution sales (14,351,286) (9,663,398)
(74,732,116) (45,584,141)
Total (49,839,388) (48,757,244) (181,722,499) (205,943,808)
Gross profit
Direct sales
21,694,066
33,495,986
88,830,925
131,164,842
Distribution sales
(733,751)
5,216,354
22,687,761
24,949,263
Total
20,960,315
38,712,340
111,518,686
156,114,105
Operating (expenses) income
Advertising expenses (14,649,802) (17,395,230) (58,469,862)
(68,562,714) Other selling and marketing expenses
(11,758,219) (16,453,327) (43,376,505) (59,854,030) G&A
expenses (7,759,038) (9,807,455) (25,434,172) (31,680,711)
Other operating income, net 1,355,873 3,128,004 2,976,811
5,083,568
Total operating (expenses) income (32,811,186) (40,528,008)
(124,303,728) (155,013,887)
Income (loss) from operations (11,850,871) (1,815,668)
(12,785,042) 1,100,218
11 / 11
Other income 549,569 999,354 4,028,979 7,050,194
Income (loss) before income taxes, extraordinary items
(11,301,302) (816,314) (8,756,063) 8,150,412
Income tax - current 141,173 822,052 (334,277) (2,178,034)
Income tax - deferred 1,727,038 (932,962) 1,873,217 (932,962)
Income (loss) from continuing operations (9,433,091)
(927,224) (7,217,123) 5,039,416
Income from discontinued operations, net of tax - - -
-
Income from extraordinary items, net of tax 827,531 -
827,531 -
Net income (loss) (8,605,560) (927,224) (6,389,592)
5,039,416
Net income (loss) attributable to noncontrolling interests
(87,160) (79,252) (19,589) 83,843
Net income (loss) attributable to Acorn International, Inc.
(8,692,720) (1,006,476) (6,409,181) 5,123,259
Income (loss) per ADS
Basic (0.29) (0.03) (0.22) 0.17
Diluted (0.29) (0.03) (0.22) 0.17
Weighted average number of ordinary shares used in
calculating income per ADS (each ADS represents three
ordinary shares)
Basic
89,103,111
89,927,124
88,923,162
89,796,835
Diluted
89,103,111
89,927,124
88,923,162
89,796,835
###
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This press release was issued by Acorn International Inc. and was initially posted at http://ir.chinadrtv.com/announce/81/EN/03-20-12.Q4FY2011.Earnings.II.Final-4 clean_HlmLJcA3hJkp.pdf . It was distributed, unedited and unaltered, by noodls on 2012-03-20 13:40:16 PM. The issuer is solely responsible for the accuracy of the information contained therein.
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