Global Sources Ltd. News
Global Sources Announces Fourth Quarter and Fiscal Year 2007 Results
NEW YORK,
Global Sources' chairman and CEO, Merle A. Hinrichs, said: "We had a very good year in 2007 financially, and in making investments to establish the foundation for continued success. In 2008 we plan to invest even more heavily in our online and trade show businesses.
"For our export-focused online business, last October we launched Global Sources Online 2.0, offering what we believe is the premier search experience in our industry. In
"We also continue to build on the outstanding success of our
"As we begin 2008, we are extremely pleased with our position in the market, with our products, and with our growth prospects. Our supplier customers typically have three primary objectives: lead generation, branding and differentiation, and opportunities to meet face-to-face with buyers. With our integrated offering of online marketplaces, trade shows and magazines, we address all three objectives, a clear and powerful differentiation from our online competitors who only address the lead generation objective."
Non-GAAP Metrics
Management believes non-GAAP metrics are useful measures of operations and provides GAAP to non-GAAP reconciliation tables at the end of this press release. Effective
Highlights: Fourth Quarter 2007 Compared to Fourth Quarter 2006 Revenue was $60.8 million, up 16% from $52.3 million. — Online revenue was $20.5 million, up 21% from $16.9 million. — Exhibitions revenue was $25.5 million, up 18%. — Print revenue was essentially flat at $13.5 million. — Revenue from mainland China was $38.6 million, up 28%. — Total deferred income and customer prepayments were $83.1 million as at Dec. 31, 2007, up 30% from $63.8 million as at Dec. 31, 2006.
In accordance with generally accepted accounting principles (GAAP), fourth quarter 2007 net income was
— $2.4 million gain from the sale of equity interests in HC International, Inc.; — $3.1 million write-down on the investment in Blue Bamboo; and — $3.6 million non-cash stock based compensation expense (SBC) based on the Dec. 31, 2007 stock price of $28.22.
For the fourth quarter of 2006, GAAP net income was
For the fourth quarter of 2007, non-GAAP net income was
Highlights: Year Ended
For the fiscal year ended
— $1.8 million impairment charge on the HC International investment; — $2.4 million gain from the sale of equity interests in HC International; — $3.1 million write-down on the investment in Blue Bamboo; and — $7.8 million SBC based upon stock prices at the end of each quarter.
2006 GAAP net income was
CFO
Financial Expectations: First Half Revenue — Up 15% to 17%
Revenue for the first quarter 2008 ending
Revenue for the six-month period ending
Heng said: "In 2008, online and trade shows are expected to drive our growth, while print is expected to remain soft. We plan to continue investing in five areas related to our online and trade show initiatives: 1) sales representation; 2) IT infrastructure; 3) content development; 4) marketing to suppliers; and 5) marketing to buyers. While this may affect our earnings, we expect these investments to positively impact our growth by 2009."
Recent Corporate Highlights: New Web Sites, Expanded
— Launched Global Sources Online 2.0 ( http://www.globalsources.com ), a unique new vertical search engine and marketplace, which delivers comprehensive search results including both verified and unverified suppliers. — Grew lead generation, which is measured as requests for information from buyers to suppliers through Global Sources Online 2.0, to over 27 million for the 12 months ended Dec. 31, 2007, an increase of over 10 million compared to Dec. 31, 2006. — Launched the Six Star Program which enables buyers to evaluate suppliers based on the amount of third party verification information provided, and also involves a comprehensive repackaging and repricing of services for suppliers. — Launched a new Chinese-language vertical search engine and online marketplace called China Global Sources Online ( http://www.globalsources.com.cn ) to facilitate domestic B2B trade within China. — Concluded the largest-ever China Sourcing Fairs in October in Hong Kong. There were approximately 7,520 booths and the shows were profitable for the first time since their launch in April 2006. — The largest-ever International IC-China shows are concluding on March 11th, with over 1,400 booths, up 37% over 2007. Major expansion plans also have been announced for 2009 including new locations and increased frequency. — Launched and announced new initiatives for exporters in India: Private Sourcing Events for Casino, Carrefour, El Corte Ingles, Markant and Sears, held in February 2008 in New Delhi by the company's sales representative for India; introduction of the Six Star Program; and the scheduled launch of India Sourcing Fair: Home Products in Hong Kong in 2009. — The first China Sourcing Fairs for the China domestic market were held in Shanghai in December 2007, and plans were announced for the shows to also be held in Guangzhou each June. — Increased Global Sources' independently certified community of active buyers to more than 657,000 at the end of the fourth quarter, a 17% increase compared to the same quarter last year. — Announced the authorization of a stock buyback program for up to $50 million. — Announced a one for ten share bonus share issue, which was distributed on or about Feb. 1, 2008.
Conference Call for Global Sources Fourth Quarter 2007 Earnings
Chairman and CEO, Merle A. Hinrichs, is scheduled to conduct a conference call at
For those who cannot listen to the live broadcast, a webcast replay of the call is scheduled to be available on the company's corporate site for at least 30 days. A telephone replay of the call is also scheduled to be available through
About Global Sources
Global Sources is a leading business-to-business media company and a primary facilitator of trade with Greater
The company provides sourcing information to volume buyers and integrated marketing services to suppliers. It helps a community of over 657,000 active buyers source more profitably from complex overseas supply markets. With the goal of providing the most effective ways possible to advertise, market and sell, Global Sources enables suppliers to sell to hard-to-reach buyers in over 230 countries.
The company offers the most extensive range of media and export marketing services in the industries it serves. It delivers information on 2 million products and more than 170,000 suppliers annually through 14 online marketplaces, 13 monthly magazines, over 100 sourcing research reports and 10 specialized trade shows which run 32 times a year across nine cities.
Suppliers receive more than 27 million sales leads annually from buyers through Global Sources Online ( http://www.globalsources.com ) alone.
Global Sources has been facilitating global trade for 37 years. Global Sources' network covers more than 69 cities worldwide. In mainland
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements.
— Tables to Follow — GLOBAL SOURCES LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data) At At December 31 December 31 2007 2006 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $197,825 $135,093 Available-for-sale securities — 20,702 Accounts receivable, net 6,665 6,468 Receivables from sales representatives 12,303 13,238 Inventory 1,108 889 Prepaid expenses and other current assets 15,333 14,174 Deferred tax assets 46 — Total Current Assets 233,280 190,564 Property and equipment, net 35,352 28,374 Long term investments 100 100 Bonds held to maturity, at amortized cost 99 289 Deferred tax assets - long term 196 — Other assets 2,781 1,562 Total Assets $271,808 $220,889 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $5,577 $6,804 Deferred income and customer prepayments 78,141 62,036 Accrued liabilities 12,546 12,427 Income taxes payable 694 751 Total Current Liabilities 96,958 82,018 Liabilities for incentive and bonus plans — 102 Deferred income and customer prepayments - long term 4,934 1,802 Deferred tax liability 283 403 Total Liabilities 102,175 84,325 Minority interest 4,940 2,913 Shareholders' equity: Common shares, US$0.01 par value; 75,000,000 shares authorized; 46,572,092 (2006: 46,499,492) shares issued and outstanding 466 465 Additional paid in capital 133,987 125,790 Retained earnings 28,829 4,830 Accumulated other comprehensive income 1,411 2,566 Total Shareholders' Equity 164,693 133,651 Total Liabilities and Shareholders' Equity $271,808 $220,889 GLOBAL SOURCES LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data) Three months ended Year ended December 31 December 31 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: Online and other media services (Note 1) $33,969 $30,335 $125,818 $113,097 Exhibitions 25,455 21,608 51,608 42,122 Miscellaneous 1,360 361 4,633 1,262 60,784 52,304 182,059 156,481 Operating Expenses: Sales (Note 2) 20,641 15,451 61,773 50,380 Event production 9,915 9,169 20,155 18,414 Community (Note 2) 9,327 8,231 27,086 24,885 General and administrative (Note 2) 12,238 10,605 44,167 38,945 Online services development (Note 2) 1,503 1,145 5,703 4,499 Amortization of software costs 75 328 193 1,250 Total Operating Expenses 53,699 44,929 159,077 138,373 Income from Operations 7,085 7,375 22,982 18,108 Interest and dividend income 1,721 1,797 6,595 5,571 Gain on sale of available-for-sale securities 2,937 — 2,937 309 Gain on sale of shares to minority shareholder and interest income thereon — 7,906 — 7,906 Loss on investment, net — (743) (1,846) (743) Impairment of goodwill and intangible assets (Note 3) (3,101) — (3,101) — Foreign exchange gains (losses), net (455) (258) (1,213) (714) Income before Income Taxes 8,187 16,077 26,354 30,437 Income Tax Expense 318 (323) (328) (899) Net Income before Minority Interest $8,505 $15,754 $26,026 $29,538 Minority interest (357) (444) (2,027) (1,909) Net Income before cumulative effect of change in accounting principle $8,148 $15,310 $23,999 $27,629 Cumulative effect of change in accounting principle (Note 4) — — — $251 Net Income $8,148 $15,310 $23,999 $27,880 Diluted net income per share $0.17 $0.33 $0.51 $0.60 Total shares used in diluted net income per share calculations 47,169,292 46,586,590 46,986,861 46,538,312 Note: 1. Online and other media services consists of: Three months ended Year ended December 31 December 31 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Online services $20,501 $16,927 $75,919 $64,396 Print services 13,468 13,408 49,899 48,701 $33,969 $30,335 $125,818 $113,097 Note: 2. Non-cash compensation expenses associated with the several employee equity compensation plans and Directors Purchase Plan included under various categories of expenses are as follows: Three months ended Year ended December 31 December 31 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Sales $2,417 $707 $4,286 $1,790 Community 112 66 269 145 General administrative 919 381 2,875 1,950 Online services development 122 39 347 181 $3,570 $1,193 $7,777 $4,066 Note: 3. Represents the impairment loss recorded on goodwill and intangible assets associated with the business acquisition of Blue Bamboo China Ventures. Note: 4. Represents the cumulative effect of change in accounting principle, resulting from the adoption of SFAS No. 123(R) with effect from January 1, 2006. GLOBAL SOURCES LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data) Year ended December 31 2007 2006 (Unaudited) Cash flows from operating activities: Net income $23,999 $27,880 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 4,614 4,678 Accretion of U.S. Treasury strips zero % coupons (15) (26) Impairment of investment, goodwill and intangible assets 5,402 — Profit on sale of equipment (3) (30) Bad debt expense 444 216 Non-cash compensation expense 7,777 4,066 Income attributable to minority shareholder 2,027 1,909 Gain on sale of shares to minority shareholder and interest income thereon — (7,906) Equipment written off 266 2 Effect of exchange rate changes 825 — Cumulative effect of change in accounting principle — (251) 45,336 30,538 Changes in assets and liabilities: Accounts receivables (641) (1,139) Receivables from sales representatives 935 (7,579) Inventory (219) (23) Prepaid expenses and other current assets (1,158) (3,589) Long term assets (1,219) 419 Accounts payable (1,236) 1,320 Accrued liabilities and liabilities for incentive and bonus plans 17 5,578 Deferred income and customer prepayments 19,237 10,866 Tax liability (419) 313 Net cash provided by operating activities 60,633 36,704 Cash flows from investing activities: Purchase of property and equipment (11,242) (4,876) Proceeds from sale of equipment 3 30 Proceeds from matured bonds 205 200 Purchase of intangible assets (3,136) — Purchase of available-for-sale securities — (263,463) Proceeds from sale of available-for-sale securities 15,834 251,267 Net proceeds from sale of shares to minority shareholder, interest income thereon and repurchase of share dividends from minority shareholder — 2,719 Net cash used in investing activities 1,664 (14,123) Cash flows from financing activities: Amount received towards directors purchase plan 422 359 Net cash generated from financing activities 422 359 Effect of exchange rate changes on cash and cash equivalents 13 — Net increase (decrease) in cash and cash equivalents 62,719 22,940 Cash and cash equivalents, beginning of the year 135,093 112,153 Cash and cash equivalents, end of the year $197,825 $135,093 Supplemental cash flow disclosures: Income tax Paid $747 $586 GLOBAL SOURCES LTD. AND SUBSIDIARIES ACTUAL GAAP to NON-GAAP RECONCILIATION (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data) Three months ended Three months ended December 31 December 31 2007 2006 GAAP EPS $0.17 $0.33 GAAP Net Income $8,148 $15,310 Non-cash stock based compensation expense / (credit) (Note 1) 3,570 1,193 Gain on sale of HC shares (2,361) Note 2 — Impairment charge for Blue Bamboo 3,101 Note 3 — Loss on investment, net — 743 Note 5 Gain on sale of shares to minority shareholder and interest income thereon — (7,906)Note 6 Non-GAAP Net Income $12,458 $9,340 Non-GAAP diluted net income per share $0.26 $0.20 Total shares used in non-GAAP diluted net income per share calculations 47,169,292 46,586,590 GLOBAL SOURCES LTD. AND SUBSIDIARIES CONTINUED ACTUAL GAAP to NON-GAAP RECONCILIATION (In U.S. Dollars Thousands, Except Number of Shares and Per Share Data) Year ended Year ended December 31 December 31 2007 2006 GAAP EPS $0.51 $0.60 GAAP Net Income $23,999 $27,880 Non-cash stock based compensation expense / (credit)(Note 1) 7,777 4,066 Gain on sale of HC shares (2,361) Note 2 — Impairment charge for Blue Bamboo 3,101 Note 3 — Loss on investment, net 1,846 Note 4 743 Note 5 Gain on sale of shares to minority shareholder and interest income thereon — (7,906) Note 6 Non-GAAP Net Income $34,362 $24,783 Non-GAAP diluted net income per share $0.73 $0.53 Total shares used in non-GAAP diluted net income per share calculations 46,986,861 46,538,312 Notes: (1) Non-cash stock based compensation expense / (credit). (2) A gain of approximately $2.4 million arising from the sale of the shares of HC International. (3) Impairment charge of approximately $3.1 million recorded by the company on intangible assets and goodwill pertaining to the business acquisition of Blue Bamboo China Ventures. (4) An impairment charge of approximately $2.3 million on the company's HC International investment, net of $0.5 million received pursuant to indemnification obligations of the vendor under the purchase agreement for HC International investment. (5) An impairment charge of approximately $743,000 on the company's HC International investment. (6) A gain of $7.9 million related to the sale of 199 shares of its subsidiary eMedia Asia Ltd. to minority shareholder and interest income thereon.
Management believes non-GAAP measures are useful measures and provides GAAP to Non-GAAP reconciliation tables at the end of this press release.
— Effective March 11, 2008, non-GAAP net income will be defined as net income excluding non-cash stock based compensation (SBC) expense or credit, gains or losses on acquisitions and investments and/or impairment charges. — For press releases, presentations, conference calls and other public references prior to March 11, 2008, the definition of non-GAAP EPS used includes SBC. — Non-GAAP EPS has been and will continue to be defined as non-GAAP net income divided by the weighted average of diluted common shares outstanding. — Actual SBC is calculated based on the share price of the last day of the quarter. — In 2007, the company estimated SBC using the stock price of the last day of the prior quarter; for example, using the September 28th stock price to estimate SBC for the period ended December 31st. — In 2008, the company will estimate SBC using the stock price approximately 10 days prior to the earnings report press release; for example, using the February 29th stock price to estimate SBC for the period ended March 31st. GLOBAL SOURCES LTD. AND SUBSIDIARIES GUIDANCE GAAP to NON-GAAP RECONCILIATION (In U.S. Dollars Million, Except Number of Shares and Per Share Data) GUIDANCE ACTUAL Three months Three months ended March 31 ended March 31 2008 2007 Revenue $39.50 to $40.00 $34.9 GAAP EPS $0.15 to $0.16 $0.14 Non-cash stock based compensation expense / (credit) (Note 1) ($0.04) ($0.04) $0.01 Loss on investment, net (Note 2) — — — Non-GAAP diluted net income per share $0.11 to $0.12 $0.15 Total shares used in non-GAAP diluted net income per share calculations 47,319,376 47,319,376 46,647,144 GLOBAL SOURCES LTD. AND SUBSIDIARIES CONTINUED GUIDANCE GAAP to NON-GAAP RECONCILIATION (In U.S. Dollars Million, Except Number of Shares and Per Share Data) GUIDANCE ACTUAL Six months Six month ended June 30 ended June 30 2008 2007 Revenue $101.00 to $102.50 $87.5 GAAP EPS $0.32 to $0.34 $0.23 Non-cash stock based compensation expense / (credit) (Note 1) ($0.02) ($0.02) $0.07 Loss on investment, net (Note 2) — — $0.04 Non-GAAP diluted net income per share $0.30 to $0.32 $0.34 Total shares used in non-GAAP diluted net income per share calculations 47,437,463 47,437,463 46,843,657 Notes: (1) Non-cash stock based compensation expense / (credit). (2) An impairment charge of approximately $2.3 million on the company's HC International investment, net of $0.5 million received pursuant to indemnification obligations of the vendor under the purchase agreement for HC International investment. Management believes non-GAAP measures are useful measures. — Effective March 11, 2008, non-GAAP net income will be defined as net income excluding non-cash stock based compensation (SBC) expense or credit, gains or losses on acquisitions and investments and/or impairment charges. — Non-GAAP EPS is defined as non-GAAP net income divided by the weighted average of diluted common shares outstanding. — Actual SBC is calculated based on the share price of the last day of the quarter. — Projected SBC is estimated using the stock price on February 29, 2008 (approximately 10 days prior to the earnings report release). Based on the stock price of $12.20 on February 29, 2008 compared to the December 31, 2007 stock price of $28.22. SBC for the first quarter of 2008 is estimated to be a credit of $0.04 per diluted share. Using the stock price of $12.20 on February 29, 2008 for estimating SBC for March 31st and June 30th the six-month period is estimated to be approximately credit of $0.02 per diluted share. For financial matrix, please visit: http://xprnnews.xfn.info/GSOL/20080311/HKTU002.pdf Global Sources Press Contact in Asia: Camellia So Tel: +852-2555-5021 Email: cso@globalsources.com Global Sources Investor Contact in Asia: Investor Relations Department Tel: +852-2555-4777 Email: investor@globalsources.com Global Sources Press Contact in U.S.: James W.W. Strachan Tel: +1-480-664-8309 Email: strachan@globalsources.com Global Sources Investor Contact in U.S.: Christiane Pelz & Kirsten Chapman Lippert/Heilshorn & Associates, Inc. Tel: +1-415-433-3777 Email: investor@globalsources.com
SOURCE Global Sources
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