SHANGHAI, Aug. 20 /PRNewswire-Asia/ -- Acorn International, Inc. (NYSE: ATV) ('Acorn' or the 'Company'), a leading integrated multi-platform marketing company in China engaged in developing, promoting and selling consumer products and services through an extensive distribution network, today announced its financial results for the quarter ended June 30, 2009.

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Highlights for the Second Quarter 2009:

As a result of the 33% equity interest disposal of Yimeng described herein, Yimeng has been reported as a discontinued operation. Accordingly, the Company's consolidated statements of operations separate the discontinued operation for all historical numbers presented.

    -- Net revenues were $49.0 million, an increase of 15.9% compared to $42.3
       million in the second quarter of 2008.
    -- Gross margin was 52.1%, compared to 48.5% in the same period of 2008.
    -- Operating loss was $4.6 million, compared to a loss of $9.3 million in
       the second quarter of 2008.
    -- Net income attributable to holders of ordinary shares was $11.4 million
       compared to a $7.8 million loss for the second quarter of 2008.
    -- Net loss from continuing operations was $2.9 million compared to a $9.2
       million loss for the second quarter of 2008.  Adjusted net loss from
       continuing operations, after eliminating the effects of share-base
       compensation expenses (non-GAAP), was $2.2 million compared to $8.1
       million for the same period last year.
    -- Share-based compensation expenses were $0.8 million for the second
       quarter of 2009, compared to $1.2 million for the same period last year.
    -- Net income from discontinued operations was $14.4 million (including a
       one-time gain of $14.4 million from the sale of a 33% equity interest
       in Shanghai Yimeng Software Technology Co., Ltd. ('Yimeng')), compared
       to a $1.4 million income for the second quarter of 2008.
    -- Diluted income per ADS was $0.39.  Diluted loss per ADS from
       continuing operations was $0.10.  Excluding share-based compensation
       expenses (non-GAAP), diluted loss per ADS from continuing operations
       was $0.07.

'We continued our path to recovery in the second quarter of 2009, with double-digit growth in our top line sales and significantly reduced the net loss from the same period one year ago,' said Mr. James Hu, Chairman and CEO of Acorn. 'The continued performance of our Ozing electronic learning products and Meijin electronic dictionaries were our primary growth drivers for the second quarter. Our cosmetics and third party bank channel sales, both aimed at developing continuity business and expanding repeat purchases, are also on track to deliver strong results in the second quarter 2009. With the positive momentum we have, we are confident that we will continue to execute against our strategy of growing proprietary branded products in the second half of 2009.'

    Business Highlights for the Second Quarter of 2009:
    -- Ozing, the Company's electronic learning product and Meijin, the
       Company's electronic dictionary, continued their recovery, benefiting
       from the Company's returned focus to building propriety branded
       products.  In the second quarter 2009, sales in Ozing reached $8.1
       million from $2.8 million in the same period in 2008.  The increase in
       sales for Ozing also included the addition and growth from the
       Company's touch reader product series, which was introduced in the
       third quarter 2008.  Sales for Meijin in the second quarter grew 12.4%
       to reach $1.8 million from $1.6 million from the second quarter 2008.
       Growth in sales of our Ozing and Meijin products was driven by
       increased advertising time, improved technology, competitive pricing
       and consolidated distribution channels.
    -- Cosmetics sales in the second quarter of 2009 reached $11.5 million
       from $7.3 million in the same period in 2008, accounting for 23.5% of
       the total sales revenue.  The continued increase in revenue
       contribution was due to the increased volume in direct sales for the
       Cobor branded cosmetic line.  The cosmetic business remains an
       important business development initiative in expanding the Company's
       continuity business.
    -- Mobile handsets, in particular the proprietary branded Uking A300
       series, grew sales 28.5% to reach $12.6 million from $9.8 million in
       the same period last year, benefiting from the greater allocation of
       media resources in TV marketing for proprietary branded products.
    -- The Company's third-party bank channel sales continued its expansion
       from the first quarter of 2009.  With a total of 24 bank partners,
       revenue from third-party bank channel sales was $3.4 million in the
       second quarter of 2009, an increase of 69.1% from $2.0 million in the
       same period one year ago as a result of additional banking partners and
       increased sales volume.  The Company will continue to establish
       relationships with banking partners to further expand its customer base.
    -- In June 2009, the Company disposed of a 33% equity interest in Yimeng,
       a company engaged in the development and marketing of CPS stock
       tracking software, to focus on core competency and enhance operating
       efficiency.  Consideration for the disposal was $15.3 million in cash
       dividends and $10.5 million in cash on an original investment of
       $160,000 in December 2005.

Financial Results Highlights for the Second Quarter of 2009:

For the second quarter of 2009, total net revenues grew 15.9% to $49.0 million from $42.3 million for the second quarter of 2008.

Direct sales contributed 74.4%, or $36.4 million, to total net revenue, and remained approximately at level with the second quarter of 2008.

Distribution sales net revenue increased 112.9% year-over-year to $12.5 million for the three months ended June 30, 2009 from $5.9 million in the second quarter of 2008 as a result of the recovery in sales of our Ozing electronic learning products and the consolidation of Yiyang Yukang's mobile handset sales into the Company's financial results.

The table below summarizes the gross revenues from the three best selling product categories for the direct sales platform, distribution network and total direct and distribution sales, respectively:

                                            Three Months Ended June 30, 2009
                                                     (in US dollars)
    Direct sales
      Cosmetics                                                   11,233,790
      Mobile handsets                                             10,859,338
      Ornament                                                     2,213,540
    Distribution sales
      Electronic learning product (Ozing)                          6,517,220
      Electronic dictionary (Meijin)                               1,819,062
      Mobile handsets (Yiyang Yukang)                              1,736,195
    Total direct and distribution sales
      Mobile handsets                                             12,595,533
      Cosmetics                                                   11,513,466
      Electronic learning product (Ozing)                          8,083,172

Cost of sales for the second quarter 2009 was $23.5 million, an increase of 8.0% from $21.8 million for the second quarter of 2008, primarily due to increased costs for distribution sales. Increase in distribution sales costs was due to larger percentage of sales from mobile handsets, which generally have higher product costs.

Gross profit for the second quarter of 2009 was $25.5 million, up 24.3% compared to $20.5 million for the second quarter of 2008. Gross margin was 52.1% in the second quarter of 2009, up from 48.5% in the same period in 2008.

Gross profit from direct sales for the second quarter 2009 increased 16.9% to $21.8 million from $18.6 million for the second quarter of 2008. Gross margin for direct sales for the second quarter of 2009 was 59.7%, up from 51.1% in the same period last year. The increase in gross margin was largely due to the increase in sales of products with higher gross margins such as cosmetics and the Uking A300 series.

Gross profit from distribution sales for the second quarter of 2009 was $3.7 million, an increase of 96.6% from $1.9 million for the second quarter of 2008. Gross margin for distribution sales for the second quarter of 2009 was 29.9%, down from 32.3% for the same period last year. The decrease in gross margin was due to the addition of lower margin mobile handset sales from the consolidation of Yiyang Yukang into our financial statements.

Advertising expenses were $14.5 million for the second quarter of 2009, compared to $18.1 million for the second quarter of 2008 due to the continued reduction in the fixed portion of advertising spending in 2009. Gross profit over advertising expenses, a benchmark Acorn uses to measure return on multiple sales platforms, was 1.76 in the second quarter of 2009, up from 1.13 in the second quarter of 2008.

Other selling and marketing expenses increased 12.9% to $8.4 million from $7.4 million for the second quarter of 2008.