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Mecox Lane Limited Announces Fourth Quarter And Full Year 2010 Results

Stocks in this article: MCOX

About Non-GAAP Financial Measures

To supplement Mecox Lane's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Mecox Lane uses in this press release non-GAAP net income, which excludes share-based compensation expenses. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Mecox Lane believes that the non-GAAP financial measure facilitates investors' and management's comparisons to Mecox Lane's historical performance and assists management's financial and operational decision making. A limitation of using the non-GAAP financial measure is that share-based compensation expenses are recurring expenses that will continue to exist in Mecox Lane's business for the foreseeable future. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from the non-GAAP measure. The accompanying table has more details on the reconciliation between the non-GAAP financial measure and its most directly comparable GAAP financial measure.

1 Gross profit excludes the impact of depreciation and amortization expenses.

2 Cost of Goods sold excludes depreciation and amortization expenses.

3 Non-GAAP net income excludes share-based compensation expenses. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections of "About Non-GAAP Financial Measures" and the accompanying table of "Mecox Lane Limited - Consolidated Statement of Operations Information - Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of this press release.

Mecox Lane Limited
Consolidated Balance Sheet Information
     
     
  December 31, 2009 December 31,  2010
  $ $
ASSETS     
Current assets:     
Cash and cash equivalents  18,757,853  86,011,952
Short-term investments  7,322,363  30,199,200
Accounts receivable, net of allowances of $101,878 and $77,338 as of December 31, 2009 and December 31, 2010, respectively  1,925,924  1,487,298
Other receivables  4,118,038  9,662,105
Advances to suppliers and prepaid expenses  1,585,946  1,410,510
Merchandise inventories  19,237,919  35,809,524
Deferred tax assets—current portion  1,586,694  1,672,078
     
Total current assets   54,534,737  166,252,667
Property and equipment, net  6,661,692  8,696,636
Intangible assets, net  882,953  1,283,370
Deferred tax assets—long term portion  118,088  1,271,691
Other non-current assets  870,813  439,798
     
TOTAL ASSETS  63,068,283  177,944,162
     
LIABILITIES, MEZZANINE EQUITY AND EQUITY (DEFICIT)    
Current liabilities:     
Accounts payable   19,533,202  24,117,767
Advances from customers  5,146,785  5,839,069
Amount due to related parties  175,741  8,529
Accrued expenses  7,779,932  6,553,143
Other current liabilities  3,200,162  4,311,094
Income tax payable  1,920,342  1,429,415
     
Total current liabilities   37,756,164  42,259,017
     
Mezzanine equity:    
Convertible non-redeemable preference shares    
Series B preference shares ($0.0001 par value; 8,600,000 shares authorized; 8,551,400 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)  18,476,503  -- 
Series C preference shares ($0.0001 par value; 1,450,000 shares authorized; 1,441,024 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)  3,113,535  -- 
Series D preference shares ($0.0001 par value; 1,750,000 shares authorized; 1,733,832 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)  3,764,188  -- 
Redeemable noncontrolling interests  25,000  25,000
     
Equity (deficit):    
Ordinary shares ($0.0001 par value; 390,000,000 and 10,000,000,000 shares authorized, 209,230,993 and 405,192,257 shares issued and outstanding as of December 31, 2009 and 2010, respectively)  20,923  40,519
Additional paid-in capital   29,116,169  159,437,097
Accumulated deficit  (30,654,082)  (26,223,473)
Accumulated other comprehensive income  1,349,883  2,292,147
     
Total Mecox Lane Limited equity   (167,107)  135,546,290
Noncontrolling interests  100,000  113,855
     
Total equity (deficit)  (67,107)  135,660,145
     
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY (DEFICIT)  63,068,283  177,944,162
 
Mecox Lane Limited
Consolidated Statement of Operations Information 
         
  Three-month Periods Ended December 31 Year Ended December 31
  2009 2010 2009 2010
  $ $ $ $
         
Net revenues:        
 Online platform  42,448,508  50,073,321  129,362,292  178,768,558
 Directly operated stores  13,177,051  8,192,719  37,387,809  30,709,926
 Franchised stores  5,071,572  5,906,110  10,939,090  18,062,814
Total net revenues  60,697,131  64,172,150  177,689,191  227,541,298
         
Cost of goods sold (excluding depreciation and amortization)        
 Online platform  23,865,039  31,444,457  74,490,208  107,388,996
 Directly operated stores  5,821,810  3,525,662  16,055,383  13,521,818
 Franchised stores  3,216,029  3,982,763  6,511,990  11,730,807
Total cost of goods sold (excluding depreciation and amortization)  32,902,878  38,952,882  97,057,581  132,641,621
         
Operating expenses:        
 Selling, general and administrative expenses  23,244,311  23,541,910  68,504,581  86,244,899
 Depreciation and amortization  1,008,198  1,083,752  3,598,498  4,468,527
 Other income, net  (73,527)  (500,439)  (254,312)  (774,986)
         
Total operating expenses  24,178,982  24,125,223  71,848,767  89,938,440
         
Income from operations  3,615,271  1,094,045  8,782,843  4,961,237
Interest income  91,572  243,750  351,496  440,875
         
Income before income taxes  3,706,843  1,337,795  9,134,339  5,402,112
Income tax expense  782,349  217,942  1,922,118  957,648
         
Net income  2,924,494  1,119,853  7,212,221  4,444,464
         
Earnings per ordinary share:        
 Basic  0.009  0.003 0.022  0.010
 Diluted  0.008  0.003 0.022  0.008
Earnings per ADS        
 Basic  0.062  0.020  0.153  0.073
 Diluted  0.054  0.018  0.152  0.059
Weighted average ordinary shares used in per share calculation        
 Basic  205,381,732  350,765,485  205,381,732  242,026,404
 Diluted  359,301,052  440,576,787  332,293,300  396,873,164
         
         
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures      
Non-GAAP net income (1)  3,709,781  1,997,898  9,853,166  7,790,360
         
Note (1) We define non-GAAP net income, a non-GAAP financial measure, as net income excluding share-based compensation expenses. We review non-GAAP net income together with net income to obtain a better understanding of our operating performance. We also believe it is useful supplemental information for investors and analysts to assess our operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in our business. However, the use of non-GAAP net income has material limitations as an analytical tool. One of the limitations of using non-GAAP net income is that it does not include all items that impact our net income for the period. In addition, because non-GAAP net income is not calculated in the same manner by all companies, it may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP net income in isolation from or as an alternative to net income prepared in accordance with U.S. GAAP.
         
The following table sets forth the reconciliation of non-GAAP net income, a non-GAAP financial measure, from net income, our most directly comparable financial measure presented in accordance with U.S. GAAP, for the periods indicated.
         
  Three-month Periods Ended December 31 Year Ended December 31
  2009 2010 2009 2010
  $ $ $ $
Net income  2,924,494  1,119,853  7,212,221  4,444,464
Add back: Share-based compensation expenses  785,287  878,045  2,640,945  3,345,896
         
Non-GAAP net income  3,709,781  1,997,898  9,853,166  7,790,360
CONTACT: For investor and media inquiries please contact:

         In China:

         Phili Xu
         Mecox Lane Limited
         Tel: +86-21-6495-0500 or +86-21-5464-9900 Ext. 8161
         Email: ir@m18.com 

         Candice Sun
         Ogilvy Financial, Beijing
         Tel: +86-10-8520-6524
         Email: mcox@ogilvy.com

         In the U.S.:

         Jessica Barist Cohen
         Ogilvy Financial, New York
         Tel: +1-646-460-9989	
         Email: mcox@ogilvy.com

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