SHENZHEN, China, April 3 /Xinhua-PRNewswire/ -- Diguang International Development Co., Ltd. (BULLETIN BOARD: DGNG) (''Diguang'') today announced financial results for its 2006 fiscal year, ended December 31, 2006.

offset by a product mix improvement in favor of higher-priced and higher-value-added products, although achieving such product mix improvements required additional costs and strategic investments. Gross profit for FY2006 was $10.5 million, or 32.9% of sales, compared to $12.6 million, or 35.3% of sales, for the prior fiscal year.

During the 2006 fourth quarter, the Company recorded a non-cash inventory write-down of $545,000. Excluding the inventory provision, raw materials costs declined 16% for the 2006 fiscal year as compared to 2005.

Total operating expenses (general and administrative, research and development and selling) for fiscal 2006 amounted to $8.5 million, compared to $3.3 million in fiscal 2005. Part of this increase consisted of share-based compensation of approximately $2.1 million in 2006, which was accounted for in accordance with SFAS No. 123(R). There was no share-based compensation in 2005. A reconciliation of GAAP and non-GAAP operating results is provided below.

Selling expenses totaled $1.5 million in 2006, an increase of $65,000, or 4.4%, compared to 2005 selling expenses of approximately $1.5 million. This increase, which was partly offset by lower trade agency commissions year over year, was small despite the Company's heightened efforts to expand market share and promote new products such as backlights for computer monitors and television sets, as well as increases in the Company's sales staff headcount, higher sales incentives and higher advertising and trade show attendance.

Research and development expenses, net of government subsidies, increased by 8.1% year over year, to $786,000, or approximately 2.5% of net revenues, from $727,000, or 2.0% of net revenues, in the prior year.

General and administrative expenses totaled $6.1 million for the 2006 fiscal year, an increase of $5.0 million from $1.1 million in 2005. A component of this increase was $2.1 million in amortized share-based compensation as noted above, versus no such expense in the 2005 period. The rest of the year-over-year increase was primarily due to increased levels of compensation for key positions, and increased staff counts. As a percentage of revenues, G&A expenses represented 3.1% and 19.3% of net revenues for fiscal years 2005 and 2006, respectively.

Net income for fiscal 2006 was $1.7 million, a decrease of approximately $7.2 million, or 81.2%, from $8.8 million in 2005. Primary drivers of the decrease were decreased revenues and increased operating expenses, including share-based compensation, as outlined above. Earnings per basic share for fiscal 2006 were $0.08, compared to $0.48 in fiscal 2005, reflecting lower net income attributable to common shareholders divided by average weighted shares outstanding that increased from 18.3 million shares for 2005 to 21.7 million shares for 2006.

Without the share-based compensation expenses accounted for in accordance with SFAS No. 123(R) and the inventory write-down noted above, fiscal 2006 net income on a non-GAAP basis would have been $4.3 million, or $0.20 per share. A reconciliation of GAAP and non-GAAP operating results is provided below.

Diguang's cash and cash equivalents as of December 31, 2006 totaled $18.9 million compared to cash and cash equivalents of $10.1 million as of December 31, 2005.

The conference call and webcast will take place at 8:30 a.m. Eastern (U.S.) time on Tuesday, April 3, 2007. Anyone interested in participating should call 866-356-4441 if calling from within the United States, or 617-597- 5396 if calling internationally; the passcode is 33278793.

There will be a replay available until April 10, 2007. To listen to the playback, please call 888-286-8010 if calling within the United States, or 617-801-6888 if calling internationally. Please use passcode 48557113 for the replay.

The event will also be webcast live and a webcast archive will be available for 90 days. The webcast will be available at: http://phx.corporate-ir.net/playerlink.zhtml?c=137803&s=wm&e=1519591 and is being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at http://www.earnings.com/ , Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents ( http://www.streetevents.com/ ), a password-protected event management site.

In the fourth quarter of fiscal 2006, Diguang wrote down inventory in the form of raw materials valued at $545,000, in a non-recurring event that reduced GAAP net income per share by approximately $0.03. In addition, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), which requires the Company to begin recognizing compensation expense relating to stock-based payment transactions. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company provides non-GAAP financial information. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results for the quarter and nine months ended September 30, 2006 is included below. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

Diguang, through its subsidiaries, specializes in the research, development, production, sale and distribution of backlights and backlight technologies. A backlight is the typical light source of a liquid crystal display (LCD). The Company is focused on providing LED and CCFL backlights for international producers of televisions, monitors, cellular phones, digital cameras, DVDs and other home appliances. Diguang currently develops an average of approximately 50 new products per month. Diguang is a Nevada corporation with its manufacturing subsidiary located in Shenzhen, PRC, and its sales and marketing subsidiary located in the British Virgin Islands.

This press release contains forward-looking statements made under the ''safe harbor'' provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are statements that are not historical facts such as statements that we remain optimistic that the rollout of our exciting new computer monitor backlight products will gain traction in the coming months and that these new products will position us for high growth and gains in market share during 2007. Such forward-looking statements are based upon the current plans, estimates and projections of Diguang's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new products introduction; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks not included herein, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Diguang does not assume any obligation to update the information contained in this press release.

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