Global-Tech Advanced (NASDAQ:GAI)

Third Quarter 2012 Results

• Net sales for the third quarter of fiscal 2012 were $44.2 million, an increase of approximately 81% when compared to $24.4 million for the corresponding quarter in fiscal 2011.
• Net income for the third quarter of fiscal 2012 was $3.3 million, or $1.09 per share, compared to a net loss of $1.5 million, or $0.48 per share, for the third quarter of fiscal 2011.

John C.K. Sham, the Company's President and Chief Executive Officer, said: “Our third quarter is typically our strongest and we were pleased with the improved financial performance in several areas of our business. Improved results in the third quarter of fiscal 2012 were due in part to sales increases and improved profit margins in the Company’s three business segments, as well as declining commodity prices in the second half of calendar 2011 and the easing of inflationary pressures in China. These factors, while contributing positively to the Company’s third quarter operating results, are likely to change in the near future.”

Mr. Sham continued, “As previously announced, we are nearing completion of our exit from the home appliance business and, with the cooperation from our customers, were able to manufacture additional inventory during the transitional period to ensure a smooth phase out process for both the Company and its customers. As stated above, the increase in purchase orders from customers seeking to increase inventory positively impacted our financial results for this quarter.”

Mr. Sham concluded, “Our assets, particularly our liquid resources, continue to increase and, as of December 31, 2011, on a per share basis, far exceed the current trading price of the Company’s stock. We believe we can use resources previously dedicated to the home appliance segment more effectively by reallocating these resources and the efforts of the Company’s management and employees towards business opportunities that we believe will provide better margins and positive returns on investment.”

Second Quarter 2012

• Net sales for the second quarter of fiscal 2012 were $33.8 million, an increase of 35% when compared to $25.0 million for the corresponding quarter in fiscal 2011.
• Net income was $1.2 million, or $0.39 per share, compared to a net loss of $0.9 million, or $0.29 per share, for the second quarter of fiscal 2011.

John C.K. Sham, the Company's President and Chief Executive Officer, said: "While net sales improved in the second quarter and first half of fiscal 2012, our year to date gross profit margins were less than margins in fiscal 2011 as costs of labor, materials and utilities continued to increase. Although commodity prices have recently eased, energy and labor costs continue to rise, which must be addressed as part of our plans to improve profitability."

Mr. Sham continued, "As previously announced, we are nearing completion of our exit from the home appliance business which will allow us to explore new business opportunities by focusing assets and personnel towards business activities which we believe will create short- and long-term value for our shareholders."

Mr. Sham concluded, "Our cash less short-term debt position has improved significantly since the end of fiscal year 2011 and, as of September 30, 2011, now exceeds $13.00 per share. We remain committed to the use of company resources to explore and pursue business opportunities that we believe have a good probability of success."

Global-Tech Advanced Innovations Inc. is a holding company, owning subsidiaries that manufacture and market a diversified portfolio of products, such as complementary metal oxide semiconductor (CMOS) camera modules (CCMs) and floor care products. The primary focus of its subsidiaries is to develop and market high-quality products for the communications industry in China and export such products to markets in North America, Europe, and other countries throughout the world.

HONG KONG--(BUSINESS WIRE)--Global-Tech Advanced Innovations Inc. (NASDAQ:GAI) today announced that the Company received a letter dated September 12, 2011 from The Nasdaq Global Market stating that based upon its review of the Company’s market value of publicly held shares (MVPHS) for the last 30 consecutive business days, the Company’s common stock had not maintained a minimum market value of publicly held shares of $5 million as required for continued listing on The Nasdaq Global Market by Listing Rule 5450(b)(1)(C).

The notification letter has no effect at this time on the listing of the Company’s common stock on The Nasdaq Global Market. The Company’s common stock will continue to trade on The Nasdaq Global Market under the symbol “GAI.”

The notification letter states that the Company will be afforded 180 calendar days, or until March 12, 2012, to regain compliance with the MVPHS requirement. In order to regain compliance, the Company must maintain a MVPHS of at least $5 million for a minimum of ten consecutive business days.

Third Quarter Results:

• Net loss for the third quarter of fiscal 2011 was $1.5 million, or $0.48 per share, compared to a net income of $0.7 million, or $0.24 per share, for the third quarter of fiscal 2010

John C.K. Sham, the Company's President and Chief Executive Officer, said: "Despite increased revenues from our electronic component and electronic manufacturing service businesses when compared to the prior fiscal period, net results remain affected by the continued weakness in our floor care business and margin pressures, resulting from continuing inflation in China and significant increases in the cost of labor."

Mr. Sham concluded, "We remain optimistic that our continuing efforts to further develop and expand our product offerings in China, together with improved productivity, will ultimately lead to more favorable financial results."

• Net sales for the second quarter of fiscal 2011 were $25.0 million, compared to $29.0 million for the corresponding quarter in fiscal 2010.

• Net loss for the second quarter of fiscal 2011 was $0.9 million, or $0.29 per share, compared to a net income of $1.6 million, or $0.51 per share, for the second quarter of fiscal 2010.

John C.K. Sham, the Company's President and Chief Executive Officer, said: “While revenues from our electronic component and electronic manufacturing service (EMS) businesses increased when compared to both the first quarter in fiscal 2011 and the corresponding quarter in fiscal 2010, these increased revenues were insufficient to offset the continued decline in net sales of our floor care business.”

Mr. Sham continued, “Our overall gross profit margin remains weak as operating costs, particularly labor and energy costs, continue to increase. This increase in costs was attributable, in part, to rising inflation that has been taking place in China. Additionally, our fixed cost absorption rate increased due to declining activity. Accordingly, the Company must continue to refine its focus on productivity and efficiency."

Mr. Sham concluded, “We do not expect significant improvements in our floor care business during the remainder of fiscal 2011. Accordingly, we are increasing our efforts to incorporate proprietary elements into our electronic component business and improve efficiencies in our EMS business in an attempt to position and strengthen the Company’s prospects for growth in these businesses in the near future. The Company’s continued emphasis on the expansion of our business in China remains vital to long-term growth."

• Net sales for the quarter ended June 30, 2010 were $25.8 million, compared to $25.7 million for the corresponding quarter in fiscal 2010.

• Net income for the first quarter of fiscal 2011 was $0.8 million, or $0.26 per share, compared to a net income of $1.2 million, or $0.38 per share, for the first quarter of fiscal 2010. `

While there was less than a 1% increase in net sales, first quarter results revealed significant changes in sales trends when compared to the prior fiscal year. In the first quarter of fiscal 2011, net sales of home appliances declined 19%, electronic components increased 19% and electronic manufacturing service (EMS) revenues more than doubled, compared to corresponding net sales in the first quarter of fiscal 2010. In addition, sales to Asia markets in the first quarter of fiscal 2011 represented 48% of total net sales.

John C.K. Sham, President and Chief Executive Officer, said, “Our financial results in the first quarter of fiscal 2011 were indicative of the changes taking place within our business segments. While our electronic component and EMS businesses resumed their growth and maintained profitability, operating margins in our home appliance business continued to decline as a result of increases in material cost and wage inflation. The trend of increasing raw material cost and decreasing margins are threatening the continued viability of our home appliance business.”

Mr. Sham continued, “As we continue to diversify and refocus our efforts on the telecommunications business in China, weakening of the export markets we have been serving is having less of an impact on our overall business prospects. We plan to place less emphasis on our home appliance business as we continue to expand our capabilities and sales efforts on the EMS and electronic component businesses.”

Mr. Sham concluded, “Absent a recovery in the United States markets, we expect operating margins in our home appliance business will continue to decline as costs continue to increase and volume continues to decrease. However, we expect continued growth in the electronic component and EMS businesses, which may or may not be sufficient to offset ongoing weaknesses in the appliance business in the short term.”