SAN DIEGO, Nov. 11, 2010 /PRNewswire-FirstCall/ --
InfoSonics Corporation (Nasdaq: IFON), a provider of wireless
handset solutions serving Latin
America and Asia Pacific,
today announced results for its third quarter ended September 30, 2010.
"Although our results for the quarter were disappointing, we
remain confident in our strategy," said Joseph Ram, president and CEO of InfoSonics.
"We're rapidly transitioning our business from being
primarily a distributor of wireless handsets in Latin America to being a designer and
manufacturer of handsets serving both Latin America and other emerging markets.
This quarter we experienced a significant drop in our legacy
distribution business, but we are still in the investment and
startup phase of our new Asia
Pacific business. While we had significant expenses
related to R&D and marketing during the quarter, we still
believe the benefits of our new business are forthcoming, as
evidenced by our October 19th
announcement of the inaugural shipment of our new ruggedized R80
wireless handset to our first customer in China."
Commenting further on the results and strategy, Mr. Ram noted,
"Our change in strategy will result in a change in our business
model. The distribution business is characterized by very
thin gross profit margins, exposure to inventory carrying costs and
obsolescence, high levels of sales and marketing expenses and post
sales service and support. By the end of 2011, we expect that
a minority of our business will come from distribution revenues
with the remainder being derived from the development, manufacture
and sale of our own proprietary line of wireless handsets. In
addition, we believe a substantial portion of our future revenues
will come from sales to OEM customers in Asia Pacific. As a consequence, we
expect that our gross profit margins will improve and operating
expenses will decline as a percent of sales. Although we will
now incur research and development expenses, the reduction in other
SG&A spending should more than offset our internal development
costs. Additionally, much of our production will be scheduled
on a build-to-order basis, which should result in lower inventory
levels and exposure. This quarter we incurred a number of
expenses linked to this business transition which we believe will
not be recurring. We have also taken additional steps to
de-leverage costs related to our distribution business and better
align our cost structure to our new business model. Our goal
is to restore InfoSonics to profitability in the coming year."
InfoSonics reported net sales for the third quarter of 2010 of
$8.2 million, compared to
$65.3 million for the third quarter
of 2009 and $22.4 million on a
sequential basis for the second quarter of 2010. The decrease
in net sales in both periods was due principally to continued
reductions in Argentina
distribution sales caused by the recently enacted import tariff,
which can increase the price of imported handsets by up to 30
percent. Gross margin in the third quarter of 2010 was 6.6
percent, which was the same percentage in the third quarter of 2009
and 7.0 percent in the second quarter of 2010. Included in
cost of sales for the third quarter of 2010 was a $306,000 charge to write down certain inventories
to estimated market values. Without this charge, the gross
profit margin for the quarter would have been 10.4 percent,
reflecting a higher percentage of sales derived from the company's
verykool product line.
Operating expenses in the third quarter of 2010 were
$2.5 million, compared to
$4.0 million in the third quarter of
2009 and $2.4 million in the second
quarter of 2010. The third quarter of 2010 includes
$406,000 in research and development
expenses related to the company's new China development subsidiary, which was
established during the second quarter of 2010. The decrease
in expenses in the third quarter of 2010 compared to the same
quarter last year related mostly to reductions in variable expenses
linked to the decline in sales, offset partially by the new R&D
expenses. The slight increase in expenses compared to the
second quarter of 2010 reflects a full quarter of spending for our
development team and the same level of SG&A spending.
However, SG&A expenses in the third quarter of 2010
included over $200,000 of customer
incentives which are not expected to be recurring and approximately
$100,000 of expenses for bad debts
and severance benefits from a reduction in force during the
quarter.
The company ended the third quarter of 2010 with $17.2 million in cash and cash equivalents,
representing a 38-percent increase over $12.5 million at the end of the previous quarter.
The company has no outstanding indebtedness, and
stockholders' equity at September 30,
2010 amounted to $22.1
million, equivalent to $1.56
per common share outstanding.
About InfoSonics Corporation
InfoSonics is a provider of wireless handsets and related
products to OEMs, carriers and distributors in Latin America and Asia Pacific. The Company distributes
products supplied by OEMs and also designs, develops, manufactures,
markets, sells and provides after-sales support for its own
proprietary line of products under the verykool® and other
private label brands. Additional information can be found on
our corporate website at www.infosonics.com and
www.verykool.net.
Except for the factual statements made herein, the information
contained in this news release consists of forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks, uncertainties and
assumptions that are difficult to predict. Words and
expressions reflecting optimism, satisfaction or disappointment
with current prospects, as well as words such as "believes,"
"hopes," "intends," "estimates," "expects," "projects," "plans,"
"anticipates" and variations thereof, or the use of future tense,
identify forward-looking statements, but their absence does not
mean that a statement is not forward-looking. Such forward-looking
statements are not guarantees of performance and our actual results
could differ materially from those contained in such statements.
Factors that could cause or contribute to such differences include,
without limitation: (1) intense competition internationally,
including competition from alternative business models, such as
manufacturer-to-carrier sales, which may lead to reduced prices,
lower sales, lower gross margins, extended payment terms with
customers, increased capital investment and interest costs, bad
debt risks and product supply shortages; (2) dependency on sales in
Argentina which have been
significantly reduced and may be further reduced or eliminated as a
result of the recently adopted import tariff in that country; (3)
the ability of the Company's new China R&D group to develop new
verykool® handsets and successfully introduce them into new
emerging markets; (4) extended general economic downturn in world
markets; (5) inability to secure adequate supply of competitive
products on a timely basis and on commercially reasonable terms;
(6) foreign exchange rate fluctuations, devaluation of a foreign
currency, adverse governmental controls or actions, political or
economic instability, or disruption of a foreign market, including,
without limitation, the imposition, creation, increase or
modification of tariffs, taxes, duties, levies and other charges
and other related risks of our international operations, such as
the recently adopted tax/duty change in Argentina on certain electronics (including
cellular phones), which could significantly increase selling prices
to our customers and end-users; (7) the ability to attract new
sources of profitable business from expansion of products or
services or risks associated with entry into new markets, including
geographies, products and services; (8) an interruption or failure
of our information systems or subversion of access or other system
controls may result in a significant loss of business, assets or
competitive information; (9) significant changes in supplier terms
and relationships or shortages in product supply; (10) continued
consolidation in the wireless handset carrier market; (11) loss of
business from one or more significant customers; (12) customer and
geographical accounts receivable concentration risk and other
related risks; (13) rapid product improvement and technological
change resulting in inventory obsolescence; (14) uncertain
political and economic conditions internationally, including
terrorist or military actions; (15) the loss of a key executive
officer or other key employees and the integration of new
employees; (16) changes in consumer demand for multimedia wireless
handset products and features; (17) our failure to adequately adapt
to industry changes and to manage potential growth and/or
contractions; (18) seasonal buying patterns; (19) the resolution of
any litigation for or against the Company; (20) the recent loss of
the Company's bank line of credit and the ability of the company to
have access to adequate capital to fund its operations; and (21)
the ability of the Company to generate taxable income in future
periods. Reference is also made to other factors detailed
from time to time in our periodic reports filed with the Securities
and Exchange Commission. These forward-looking statements speak
only as of the date of this release and we undertake no obligation
to publicly update any forward-looking statements to reflect new
information, events or circumstances after the date of this
release.
InfoSonics
Corporation
|
|
Consolidated
Statements of Operations
|
|
(Amounts in
thousands, except per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net sales
|
$ 8,171
|
|
$ 65,262
|
|
$ 58,065
|
|
$ 169,593
|
|
Cost of sales
|
7,629
|
|
60,928
|
|
54,513
|
|
157,832
|
|
Gross profit
|
542
|
|
4,334
|
|
3,552
|
|
11,761
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
2,103
|
|
4,013
|
|
6,191
|
|
10,414
|
|
|
Research and
development
|
406
|
|
10
|
|
653
|
|
45
|
|
|
|
2,509
|
|
4,023
|
|
6,844
|
|
10,459
|
|
Operating income (loss) from
continuing operations
|
(1,967)
|
|
311
|
|
(3,292)
|
|
1,302
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
Other income
|
7
|
|
7
|
|
9
|
|
7
|
|
|
Interest expense
|
-
|
|
(80)
|
|
(23)
|
|
(217)
|
|
Income (loss) from continuing
operations before benefit (provision) for income taxes
|
(1,960)
|
|
238
|
|
(3,306)
|
|
1,092
|
|
Benefit (provision) for income
taxes
|
20
|
|
(6)
|
|
415
|
|
(23)
|
|
Income (loss) from continuing
operations
|
(1,940)
|
|
232
|
|
(2,891)
|
|
1,069
|
|
Loss from discontinued
operation, net of tax
|
(22)
|
|
(47)
|
|
48
|
|
(406)
|
|
Net income (loss)
|
$ (1,962)
|
|
$ 185
|
|
$ (2,843)
|
|
$ 663
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share -
basic:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$ (0.14)
|
|
$ 0.02
|
|
$ (0.20)
|
|
$ 0.07
|
|
|
Discontinued
operations
|
-
|
|
(0.01)
|
|
-
|
|
(0.02)
|
|
|
Net income (loss)
|
$ (0.14)
|
|
$ 0.01
|
|
$ (0.20)
|
|
$ 0.05
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share -
diluted:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$ (0.14)
|
|
$ 0.02
|
|
$ (0.20)
|
|
$ 0.07
|
|
|
Discontinued
operations
|
-
|
|
(0.01)
|
|
-
|
|
(0.03)
|
|
|
Net income (loss)
|
$ (0.14)
|
|
$ 0.01
|
|
$ (0.20)
|
|
$ 0.04
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
14,184
|
|
14,184
|
|
14,184
|
|
14,550
|
|
|
Diluted
|
14,184
|
|
14,932
|
|
14,184
|
|
14,875
|
|
|
|
|
|
|
|
|
|
|
InfoSonics
Corporation
|
|
Consolidated
Balance Sheets
|
|
(Amounts in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(unaudited)
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$ 17,166
|
|
$ 18,418
|
|
|
Accounts receivable, net of
allowance for doubtful accounts of $194 and $590
|
4,936
|
|
41,914
|
|
|
Accounts receivable
other
|
1,110
|
|
1,004
|
|
|
Inventory, net of reserves of
$406 and $112
|
2,507
|
|
3,423
|
|
|
Prepaid assets
|
541
|
|
369
|
|
|
Assets of discontinued
operations
|
925
|
|
880
|
|
|
Total
current assets
|
27,185
|
|
66,008
|
|
Property and equipment,
net
|
244
|
|
316
|
|
Other assets
|
86
|
|
98
|
|
|
Total
assets
|
$ 27,515
|
|
$ 66,422
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$ 2,380
|
|
$ 9,619
|
|
|
Accrued expenses
|
2,918
|
|
5,666
|
|
|
Line of credit
|
-
|
|
25,494
|
|
|
Income taxes payable
|
97
|
|
91
|
|
|
Liabilities of discontinued
operations
|
55
|
|
724
|
|
|
Total
current liabilities
|
5,450
|
|
41,594
|
|
|
|
|
|
|
|
Commitments and Contingencies
(Note 13)
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred stock, $0.001 par
value, 10,000 shares authorized (no shares issued and
outstanding)
|
-
|
|
-
|
|
|
Common stock, $0.001 par value,
40,000 shares authorized, 14,184 shares issued and outstanding as
of September 30, 2010 and December 31, 2009
|
14
|
|
14
|
|
|
Additional paid-in
capital
|
31,813
|
|
31,727
|
|
|
Accumulated other comprehensive
loss
|
(13)
|
|
(7)
|
|
|
Accumulated deficit
|
(9,749)
|
|
(6,906)
|
|
|
Total
stockholders' equity
|
22,065
|
|
24,828
|
|
|
Total
liabilities and stockholders' equity
|
$ 27,515
|
|
$ 66,422
|
|
|
|
|
|
|
InfoSonics
Corporation
|
|
Consolidated
Statements of Cash Flows
|
|
(Amounts in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
Months Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
2010
|
|
2009
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
Net income (loss)
|
$ (2,843)
|
|
$ 663
|
|
|
Adjustments to reconcile net
income (loss) to net cash provided (used in) operating
activities:
|
|
|
|
|
|
|
Depreciation
|
242
|
|
223
|
|
|
|
Loss on disposal of fixed
assets
|
65
|
|
-
|
|
|
|
Provision for (recovery of) bad
debt
|
(396)
|
|
153
|
|
|
|
Provision for obsolete
inventory
|
306
|
|
(42)
|
|
|
|
Stock-based compensation
expense
|
86
|
|
49
|
|
|
|
(Increase) decrease
in:
|
|
|
|
|
|
|
|
Accounts receivable
|
37,374
|
|
(32,118)
|
|
|
|
|
Accounts receivable
other
|
(106)
|
|
3,599
|
|
|
|
|
Inventory
|
610
|
|
578
|
|
|
|
|
Prepaids
|
(172)
|
|
(318)
|
|
|
|
|
Other assets
|
11
|
|
(90)
|
|
|
|
Increase (decrease)
in:
|
|
|
|
|
|
|
|
Accounts payable
|
(7,239)
|
|
(158)
|
|
|
|
|
Accrued expenses
|
(2,747)
|
|
1,937
|
|
|
|
|
Income tax
liabilities
|
6
|
|
22
|
|
Cash provided by (used in)
continuing operations
|
25,197
|
|
(25,502)
|
|
Cash provided by (used in)
discontinued operations
|
(714)
|
|
305
|
|
Net cash provided by (used in)
operating activities
|
24,483
|
|
(25,197)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
Purchase of property and
equipment
|
(235)
|
|
(137)
|
|
|
Net cash used in investing
activities
|
(235)
|
|
(137)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
Net borrowings (payments on)
line of credit
|
(25,494)
|
|
15,792
|
|
|
Cash paid for treasury
stock
|
-
|
|
(483)
|
|
|
Net cash provided by (used in)
financing activities
|
(25,494)
|
|
15,309
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash
|
(6)
|
|
21
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
(1,252)
|
|
(10,004)
|
|
|
Cash and cash equivalents,
beginning of period
|
18,418
|
|
24,715
|
|
|
Cash and cash equivalents, end
of period
|
$ 17,166
|
|
$ 14,711
|
|
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$ 23
|
|
$ 217
|
|
|
Cash paid for
taxes
|
-
|
|
-
|
|
|
|
|
|
|
|
|
SOURCE InfoSonics Corporation