GSME Acquisition Partners I (OTCBB: GSMXF, GSMEF, GSMWF) (â€œGSMEâ€), a special purpose acquisition company formed for the purpose of acquiring an operating business having its primary business operations in the Peopleâ€™s Republic of China, and privately-held Plastec International Holdings Limited (â€œPlastecâ€ or the â€œCompanyâ€), a plastic injection molding and finishing business, announced preliminary financial results for Plastecâ€™s fiscal year 2011 first quarter ended July 31, 2010. GSME and Plastec previously announced the proposed business combination between the parties pursuant to which Plastec will become a wholly owned subsidiary of GSME, subject to certain closing conditions. The parties are seeking to close this transaction in October 2010.
The financial results in this press release are preliminary, and are subject to completion of Plastecâ€™s auditorâ€™s review of such financial statements. All amounts are in U.S. dollars unless otherwise noted.
Preliminary FY 2011 First Quarter Financial Review
Plastec expects revenues for its FY 2011 first quarter ended July 31, 2010 to range between $38 million and $40 million, an increase of between 23% and 29%, compared to revenues of $31.0 million in the FY 2010 first quarter ended July 31, 2009. The Company expects the gross margin for the period to range between 18% and 20%, compared to a gross margin of 20.0% in the prior-year period. Plastecâ€™s margins declined slightly due to increasing labor costs in China, offset by a higher margin product mix. Plastec implements a â€œcost-plusâ€ pricing model, which allows the Company to mitigate the impact of fluctuations in material costs, such as labor, and expects these higher labor costs to be priced into future contracts. The Companyâ€™s margins are considerably higher than that of its peers due to its concentration on highly specialized plastic orders. Net income for the period is expected to be between $4.5 million and $5.0 million, as compared to net income of $3.9 million for the prior-year period.
Balance Sheet Highlights
At July 31, 2010, Plastec expects its cash and cash equivalents to be $11.2 million, its working capital to be $18.1 million, and its stockholdersâ€™ equity to be $77.3 million, compared to $19.4 million, $16.0 million, and $73.0 million, respectively, at April 30, 2010. The expected decrease in the Companyâ€™s cash and cash equivalents during the quarter is a result of purchasing inventory to fulfill an order from one of its toy manufacturing customers.