Creative Master Reports Fourth Quarter and Fiscal Year Results
17 February 1999
Creative Master Reports Fourth Quarter and Fiscal Year Results
Highlights:
* Revenue for the quarter ended December 31, 1998 rose to $9.5 million,
up 306% from $3.1 million for the same quarter in the prior year
* Fourth quarter net income increased to $982,000, or $0.20 per share,
versus $227,000, or $0.05 per share the same period last year
* 1998 net sales increase to a record $33.6 million from $16.1 million,
up 209%
* Company achieved annual net income of $3.1 million, or $0.61 per share,
versus net income of $788,000, or $0.16 per share in 1997
* Company improves full year gross profit margins to 24% from 21%
* Customer base expanded
Financial Summary (In thousands, except for per share numbers)
Three Months Ended Year Ended
12/31/98 12/31/97 12/31/98 12/31/97
Net sales $ 9,504 $ 3,121 $33,633 $16,211
Gross profit 3,317 884 8,143 3,508
Net income 982 227 3,056 788
Earnings per share* $ 0.20 $ 0.05 $ 0.61 $ 0.16
* pro forma calculation based on 4,999,332 shares
outstanding at December 31, 1998
HONG KONG, Feb. 17 -- Creative Master International, Inc.
today reported significant financial and operating gains for
its fourth quarter and fiscal year ended December 31, 1998. An increase was
reported in the Company's fourth quarter and year end revenues, earnings and
gross profit margins.
Revenues for the three months ended December 31, 1998 increased by 306% to
$9.5 million from $3.1 million for the year-ago quarter. Fourth quarter net
income increased to $982,000, or a pro forma $0.20 per share, compared with
net income of $227,000, or a pro forma $0.05 per share, during the same period
last year. Pro forma calculations were based on 4,999,332 shares outstanding
at the end of 1998 as a result of the Company's public offering of
1.25 million shares at $5 per share, which was completed on December 24, 1998.
For the twelve months ended December 31, 1998, net sales increased to
$33.6 million from $16.1 million, up 209%. Creative Master reported year-end
net income of $3.1 million, or a pro forma $0.61 per share, versus net income
of $788,000, or a pro forma $0.16 per share, for the year ended December 31,
1997.
Margin Growth
Gross profit margins for the twelve months ended December 31, 1998
increased from 21% to 24%. Margins were improved through sales growth and
increased operating efficiencies and synergies as the Company added
manufacturing capacity during the year.
Strengthening Market Position
"Creative Master's fourth quarter and year end financial gains reflect our
strengthening market position as a leading manufacturer of premium, high
quality collectable replicas. During the year we made excellent strides in
strengthening our blue chip customer base and adding production capacity to
support our sales growth. This growth is also resulting in increasing profit
margins as we continue to improve our operating efficiencies on a larger sales
base," said Carl Tong, Chairman and Chief Executive Officer of Creative Master
International.
Expanding Blue-Chip Customer Base
A major driving force of the Company's growth is its expanding customer
base. In 1998, Creative Master established relationships with First Gear and
Lionel Trains to develop and manufacture high-quality replicas of their
products, increasing the Company's customer base from six to eight.
Although sales to Danbury Mint increased by 25% in 1998, these sales
declined as a percentage of total revenues from 64% to 38%. The decrease as a
percentage of revenues is a reflection of the initial success of the Company's
strategy to continue to diversify its customer base. Additional customers of
Creative Master include Mattel, Action Performance, Hallmark, and Corgi
Classic Cars.
Strong and Virtually Debt-Free Balance Sheet
As of December 31, 1998, Creative Master had cash and bank deposits in
excess of $5 million; stockholders' equity of $10.3 million; current
liabilities of $8.6 million; working capital of $5.3 million and virtually no
long-term debt. The December 31, 1998 balance sheet includes net proceeds
from the Company's December 24, 1998 public offering. Net proceeds from the
offering are being used for the expansion and improvement of the Company's
manufacturing facilities in Dungeon, China, the repayment of capital lease
obligations, repayment of short-term debt and for working capital.
The Company noted that accounts receivable at the end of the fourth
quarter were reduced to slightly more than one month when compared with
average monthly sales during the period, versus accounts receivable of more
than two months at the end of the fourth quarter of the prior year.
Bright Outlook
"Creative Master continues to enhance its market position, strengthen its
customer base and develop new products and categories. With our fifth factory
coming on stream at the end of the first quarter we will be adding another
120,000 square feet of production space which will increase our total square
footage of manufacturing space to over 500,000. Based on our current order
book and the increasing volume of our business, we are optimistic that 1999
will be another record year," concluded Mr. Tong.
About Creative Master International, Inc.
Creative Master International, established in 1987 and headquartered in
Hong Kong, is a leading independent manufacturer of collectible-quality,
die-cast replicas of cars, trucks, buses and other items. The Company offers
customers turnkey product development and manufacturing capabilities, from
design to completion of the product. The die-cast replicas Creative Master
International manufactures are marketed and distributed by the Company's
customers primarily to collectors, hobbyists and other vehicle enthusiasts in
the U.S. and Europe.
Certain matters discussed within this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Although management of Creative Master believes the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will be attained.
Factors that could cause actual results to differ materially from expectations
include the composition, timing and size of orders from and shipments to major
customers; market acceptance of new products and other risks detailed from
time to time in Creative Master's SEC reports, including the company's
prospectus dated December 24, 1998, which are incorporated by reference.
CREATIVE MASTER INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
Quarter Ended Year Ended
12/31/98 12/31/97 12/31/98 12/31/97
Net sales $ 9,504 $ 3,121 $ 33,633 $ 16,211
Cost of goods sold (6,187) (2,237) (24,490) (12,703)
Gross profit 3,317 884 9,143 3,508
Selling, general and
administrative expenses (2,043) 43 (5,113) (1,921)
Interest income 22 4 39 112
Interest expense (75) (24) (283) (216)
Other income (expenses), net 87 (287) 318 (137)
Gain on dilution of interest
in a subsidiary 0 0 77 --
Reorganization expense 0 (284) -- (284)
Amortization of goodwill (24) (25) (94) (62)
Income before income taxes 1,284 311 4,087 1,000
Provision for income taxes 5 (2) (354) (130)
Income before minority
interests 1,289 311 3,733 870
Minority interests (307) (82) (677) (82)
Net income 982 227 3,056 788
Earnings per common share
- pro forma based
on 4,999,332 shares $ 0.20 $ 0.05 $ 0.61 $ 0.16
CREATIVE MASTER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December December
1 9 9 8 1 9 9 7
$'000 $'000
ASSETS
Current assets:
Cash and bank deposits $ 5,055 $ 471
Accounts receivable, net 4,343 2,827
Deposits and prepayments 681 307
Inventories, net 3,787 2,928
Total current assets 13,886 6,533
Machinery, equipment and
capital leases, net 5,663 3,155
Long-term investment 1 1
Deferred expenditures 221 --
Goodwill 716 810
Total assets 20,467 10,499
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings 1,062 1,290
Capital lease obligations,
current portion 173 764
Accounts payable 3,965 1,908
Deposits from customers 136 560
Accrued liabilities 2,914 1,579
Loans from directors, current portion 222 861
Due to parent company -- 9
Taxation payable 133 68
Dividend payable -- 323
Total current liabilities 8,605 7,362
Capital lease obligations,
non-current portion 288 266
Loans from directors, non-current portion 444 --
Deferred taxation 220 57
Total liabilities 9,557 7,685
Minority interests 618 75
Stockholders' equity:
Common stock, par value $0.0001:
authorized -- 60,000,000 shares
as of December 31, 1997 and 25,000,000 shares
as of December 31, 1998 outstanding and
fully paid -- 3,749,322 shares as of
December 31, 1997 and 4,999,322 shares
as of December 31, 1998 1 1
Preferred stock, par value $0.0001:
authorized -- nil as of December 31, 1997
and 5,000,000 shares as of December 31, 1998
outstanding -- nil as of December 31, 1997
and 1998 -- --
Additional paid-in capital 5,898 1,401
Retained earnings 4,393 1,337
Total stockholders' equity 10,292 2,739
Total liabilities, minority
interests and stockholders' equity 20,467 10,499