SCRO after the bell!!!!Earnings look good again! biz.yahoo.com
May 21,2001
SCORE ONE INC (SCRO.OB)
Quarterly Report (SEC form 10QSB)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to the consolidated financial statements and notes thereto, included as part of this quarterly report.
NATURE OF PRESENT OPERATIONS
The Company, via its wholly owned subsidiaries, is engaged in the manufacture and sale of printed circuit boards for telecommunication systems, scientific calculators and audio visual equipment to companies in Greater China.
RESULTS OF OPERATIONS
The following table shows the selected consolidated income statement data of the Company and its subsidiaries for the three-month period ended March 31, 2001 and March 31, 2000. The data should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and the notes thereto included as part of this quarterly report:
Three-month period ended March 31
(US dollars in thousands) 2001 2000
Revenue 5,641 4,843
Cost of Sales (4,039) (3,348)
Gross Profit 1,602 1,495
Gross Profit Margin 28.4% 30.9%
Other Income 12 0
Selling Expenses (21) (5)
General and Administrative Expenses (321) (261)
Financial Expenses (5) --
Income before Income Taxes 1,267 1,229
Income Taxes (101) (98)
Net Income 1,166 1,131
Earning per shares (US$) 0.06 0.06
Score One, Inc.
REVENUE AND GROSS PROFIT MARGIN
Total revenue for the three-month period ended March 31, 2001 increased by US$798,000 or 16% to US$5.6 million, compared to US$4.8 million for the corresponding period in year 2000. During the three-month period ended March 31, 2001, the Company has continued to shift its focus on high margin flexible PCBs, which are expected to be the main stream of the PCB industry for telecommunication products. The Company also provides value-added services to its clients to improve its gross profit margin in this highly competitive industry. The increase was the result of improving sales revenue from the "high density" double-sided PCBs that was introduced to clients during the second half of year 2000.
Average gross profit margin decreased slightly from 30.9% for the three-month period ended March 31, 2000 to 28.4% for the same corresponding period in year 2001. Increase in competition for the traditional type of PCBs contributed to the decrease in gross profit margin.
OTHER INCOME
Other income during the three-month period ended March 31, 2001 was US$12,000, compared to none for the same corresponding period in 2000. The majority of other income generated was a result of the resell of scraps from the production of traditional type PCBs.
SELLING EXPENSES
Selling expenses increased by approximately US$16,000 or 320% to US$21,000 for the three-month period ended March 31, 2001. The increase in laboratory testing related expenses and delivery expenses contributed to the majority of the increase in selling expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by approximately US$60,000 or 23% to US$321,000 for the three-month period ended March 31, 2001 from US$261,000 as compared to the same period in year 2000. The following events occurring during the three-month period ended March 31, 2001 contributed to the majority of the overall increase in general and administrative expenses:
(a). Staff salaries, allowances and directors' remuneration - These expenses increased by approximately US$17,000 for the three-month period ended March 31, 2001 over the corresponding period in year 2000. The increase was the result of increase in performance bonuses.
(b). Loss on exchange - This loss on exchange increased by approximately US$16,000 for the three-month period ended March 31, 2001 as compared to the corresponding period in year 2000. This was the result of increase in remittances from Hong Kong to the PRC factory at a higher official exchange rate, HK$1 = RMB1.08 versus the market rate HK$1 =
RMB1.15.
(b). Depreciation for leasehold improvement - This depreciation increased by US$16,000 for the three-month period ended March 31, 2001 as compared to the same corresponding period in year 2000. The Company has taken up the new office in May 2000 and started to capitalize the costs of leasehold improvement since then. Therefore, additional depreciation expense was recorded.
Score One, Inc.
FINANCIAL EXPENSES
The Company had a very minimal amount of interest expenses for the three-month period ended March 31, 2001, which was incurred from charges of bank overdraft facility. The Company maintained no outside debt and did not have any interest expense on long-term debt facilities.
INCOME TAXES
The increase in income taxes was the result of the increase in income before income taxes. Under the Hong Kong Tax Authority's Departmental Interpretation and Practice Notes, a company based in Hong Kong, but with substantially all of its manufacturing operations located in the PRC, can enjoy profit appointment under which 50% of its manufacturing profit is subject to Hong Kong profits taxed. Therefore, only 50% of the profits of the Company are subject to Hong Kong profits tax. Such tax concession is granted based on annual application by the Company. The submission of profits tax returns by the Company to the Hong Kong tax authority has not yet been made and therefore the grant of concession by the Hong Kong tax authority has not yet been confirmed.
NET INCOME AND EARNING PER SHARES
For the three-month period ended March 31, 2001, net income increased by US$35,000 or 3% to US$1,166,000, compared to US$1,131,000 for the same corresponding period in year 2000. The increase was the result of increase in demand for "high density" double-sided PCBs.
Earning per shares for the three-month period ended March 31, 2001 remained approximately the same at US$0.06.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were US$106,000 as of March 31, 2001. This represents a decrease of US$21,000 over the corresponding period in year 2000. The decrease was primarily due to a reduction in cash provided by operating activities, which was primarily offset by reduced capital spending for the purchase of equipment.
Management believes that the level of financial resources is a significant competitive factor in the PCB industry and accordingly may choose at any time to raise additional capital through debt or equity financing to strengthen its financial position, facilitate growth and provide the Company with additional flexibility to take advantage of business opportunities. |
