omniture

China Fire & Security Group Announces Second Quarter 2010 Financial Results

2010-08-09 18:32 1600

BEIJING, Aug. 9 /PRNewswire-Asia/ -- China Fire & Security Group, Inc. (Nasdaq: CFSG) ("China Fire" or "the Company"), a leading industrial fire protection product and solution provider in China, today announced its financial results for the second quarter ended June 30, 2010.

Highlights for the second quarter of 2010:

-- Revenue increased 0.4% year-over-year to $22.8 million

-- Backlog totaled $145 million as of June 30th, 2010, an increase of $4

million from the end of the first quarter of 2010

(in US Dollars) Second Quarter, Second Quarter, Change (%)

2010 2009

GAAP Net Income 6,333,660 8,336,222 -24.0%

Non-Cash Option and

Restricted 1,035,674 245,049 322.6%

Stock Expenses

Non-GAAP Net Income 7,369,334 8,581,271 -14.1%

GAAP Diluted EPS 0.22 0.29 -24.3%

Non-GAAP Diluted EPS 0.26 0.30 -14.4%

Second Quarter 2010 Results

For the second quarter of 2010, the Company's total revenue increased 0.4% year over year to $22.8 million, compared to $22.7 million for the same period in 2009. This slight increase was primarily attributable to the increase in the Company's revenues from maintenance services, offset by the decrease in the Company's revenue from system contracting projects and product sales.

Revenues from system contracting projects decreased by 0.1% to $18.3 million during the second quarter of 2010, compared to $18.3 million for the same period of last year, while revenues from product sales were $3.6 million during the second quarter of 2010, compared to $3.8 million for the same period of 2009. The decrease in revenues from both system contracting projects and product sales were attributable to the slowdown in the execution of projects from the iron and steel industry, which experienced industry weakness with lower steel selling prices and rising costs of iron ore during the period.

Gross margin for the second quarter of 2010 was 54.3%, compared to a gross margin of 63.8% for the second quarter of 2009. The decrease in the Company's gross margin was mainly due to the lower revenue contribution from iron and steel industry during the period. System contracting projects from the iron and steel industry generally contribute higher gross margins than the projects from other industries, due to a higher percentage of the Company's self-manufactured proprietary products being utilized in the iron and steel projects.

The Company's operating income for the second quarter of 2010 was $7.0 million, compared to $9.6 million for the same period last year. The decrease in the operating income was mainly attributable to the decrease in the Company's gross profit and the increase in the Company's operating expenses during the period.

The Company's GAAP net income for the second quarter of 2010 was $6.3 million, compared to $8.3 million for the same period of 2009, representing an annual decrease of 24.0%. The decrease in net income was mainly due to the decrease in gross profit and increase in operating expenses during the period. As a result, the Company's fully diluted EPS was $0.22 in the second quarter of 2010, versus $0.29 in the second quarter of 2009.

If the non-cash option and restricted stock expenses are excluded, then the Company's non-GAAP net income was $7.4 million during the second quarter of 2010, compared to $8.6 million during the second quarter of 2009, representing an annual decrease of 14.1%. The Company's non-GAAP diluted EPS was $0.26 for the second quarter of 2010, compared to $0.30 for the same period of 2009.

Liquidity and Capital Resources

As of June 30, 2010, the Company had cash and cash equivalents of $27.8 million, a sequential increase of $2.6 million from $25.1 million at the end of the first quarter of 2010. During the second quarter, the Company generated $2.8 million cash from operations as compared to a positive operating cash flow of $0.4 million in the same period of last year.

Mr. Brian Lin, chief executive officer of China Fire, commented, "I am pleased with the progress we have achieved during this quarter, particularly in light of the unexpected softness in the iron and steel vertical. As we continue to build up our backlog, we remain optimistic, having seen significant opportunities and demand for our fire protection total solutions."

Financial Outlook for 2010

Based on the Company's current backlog and contract pipeline, for full year 2010, the Company now expects to achieve revenues of $118 million to $125 million, representing an annual top line growth of 45%-54%. The Company estimates that GAAP net income will be in the range of $34 million to $36 million, or EPS of $1.20 to $1.26 based on fully diluted shares outstanding of 28.5 million, representing an annual bottom line growth of 39% - 47%. This is in comparison to the previous targets of revenue of $135 million to $145 million, net income of $47 million to $49 million and EPS of $1.65 to $1.70.

Mr. Lin concluded, "We believe that the current setback within China's iron and steel industry is only a short-term challenge to our business. We find it prudent to revise our 2010 outlook accordingly. We remain fully confident in our ability to grow our business and expand our market share in different verticals. The long-term $2 billion market potential of retrofitting opportunities within the iron and steel industry has not changed, and in our view, we are well-positioned to capture tremendous business opportunities from the industry recovery and from China's industrialization process overall. As such, we believe that China Fire's current stock price level does not reflect the intrinsic value of our Company, and so we intend to actively implement our existing share buy-back plan of $10 million. We are confident that by leveraging our proprietary products, leading brand name and strong track record, China Fire will continue to gain significant market shares from the iron and steel, power generation, chemical, transportation and international markets."

Conference Call

The Company will hold a conference call to discuss the financial results at 8:00 a.m. ET today, August 9, 2010. The Company invites the participants to join the call by dialing +1-719-325-4841. To listen to the live webcast of the event, please go to http://www.chinafiresecurity.com and click on the Investor Relations section where conference calls are posted. Please go to the website 15 minutes early to download and install any necessary audio software.

A replay of the call will be available from August 9, 2010 to August 16, 2010. Listeners may access the recording by dialing +1-719-457-0820, passcode: 4879502.

About China Fire & Security Group, Inc.

China Fire & Security Group, Inc. (NASDAQ: CFSG), through its wholly owned subsidiary, Sureland Industrial Fire Safety Limited, is a leading total solution provider of industrial fire protection systems in China. Leveraging on its proprietary technologies, China Fire is engaged primarily in the design, manufacturing, sales and maintenance services of a broad product portfolio including detectors, controllers, and fire extinguishers. The Company owns a comprehensive portfolio of patents covering fire detection, system control and fire extinguishing technologies, and via its nationwide direct sales force, has built a solid client base including major companies in iron and steel, power, petrochemical and transportation industries throughout China. Founded in 1995, China Fire is headquartered in Beijing with about 430 employees in more than 30 sales and project offices throughout China. For more information about the Company, please go to http://www.chinafiresecurity.com .

Cautionary Statement Regarding Forward Looking Information

This presentation may contain forward-looking information about China Fire & Security Group, Inc. and its wholly owned subsidiary Sureland which are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, statements about industry trends and China Fire & Security Groups' future performance, operations and products. This and other "Risk Factors" are contained in China Fire & Security Groups' public filings with the SEC.

For more information, please contact:

China Fire & Security Group, Inc.

Amy Gao, Investor Relations

Tel: +86-10-8441-7400

Email: ir@chinafiresecurity.com

ICR, Inc.

In China:

Michael Tieu

Tel: +86-10-6599-7960

Email: michael.tieu@icrinc.com

In the U.S.:

Bill Zima

Tel: +1-203-682-8200

Email: bill.zima@icrinc.com

CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2010 AND DECEMBER 31, 2009

ASSETS

June 30, December 31,

2010 2009

CURRENT ASSETS: (Unaudited)

Cash and cash equivalents $ 27,773,889 $ 34,976,880

Restricted cash 4,324,670 1,837,134

Notes receivable 2,836,706 4,274,268

Accounts receivable, net of

allowance for doubtful accounts

of $7,274,109 and $6,539,787 as

of June 30, 2010 and December

31, 2009, respectively 34,350,836 30,989,569

Receivables from related party 156,069 156,599

Other receivables 616,311 368,679

Other receivables from related

parties 1,217,736 395,193

Refundable bidding and system

contracting project deposits 1,596,790 1,774,330

Inventories 5,528,866 5,360,520

Costs and estimated earnings

in excess of billings 55,302,042 36,562,573

Employee advances 1,407,024 953,625

Prepayments and deferred

expenses 3,667,230 3,397,358

Total current assets 138,778,169 121,046,728

PLANT AND EQUIPMENT, net 8,887,674 8,617,521

OTHER ASSETS:

Restricted cash - non current 3,566,050 3,602,906

Accounts receivable -

retentions 2,941,189 3,463,998

Deferred expenses - non

current 116,519 116,045

Investment in joint ventures 482,502 477,837

Intangible assets, net 1,005,912 1,041,156

Total other assets 8,112,172 8,701,942

Total assets $ 155,778,015 $ 138,366,191

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable $ 8,769,594 $ 6,903,961

Accounts payable to related

party -- 272,994

Customer deposits 2,476,834 2,182,790

Billings in excess of costs

and estimated

earnings 1,488,334 1,429,999

Other payables 472,175 333,121

Accrued liabilities 15,861,264 13,841,300

Taxes payable 8,181,622 9,002,470

Total current liabilities 37,249,823 33,966,635

COMMITMENTS AND CONTINGENCIES

EQUITY:

Common stock, $0.001 par value,

65,000,000 shares authorized,

27,595,541 shares issued and

outstanding as of June 30,

2010 and December 31, 2009,

respectively 27,595 27,595

Additional paid-in-capital 22,672,485 20,601,138

Statutory reserves 7,147,795 7,147,795

Retained earnings 80,846,934 69,266,049

Accumulated other

comprehensive income 7,791,584 7,324,237

Total shareholders' equity 118,486,393 104,366,814

Noncontrolling interest 41,799 32,742

Total equity 118,528,192 104,399,556

Total liabilities and

equity $ 155,778,015 $ 138,366,191

CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009

UNAUDITED

Three Months Ended June 30,

2010 2009

REVENUES

System contracting projects $ 18,267,248 $ 18,290,930

Products 3,556,422 3,791,491

Maintenance services 1,009,761 649,447

Total revenues 22,833,431 22,731,868

COST OF REVENUES

System contracting projects 7,876,558 6,970,283

Products 1,856,133 865,395

Maintenance services 705,688 395,619

Total cost of revenues 10,438,379 8,231,297

GROSS PROFIT 12,395,052 14,500,571

OPERATING EXPENSES

Selling and marketing 2,209,162 2,237,873

General and administrative 2,618,664 1,983,443

Depreciation and amortization 202,055 183,456

Research and development 399,701 519,987

Total operating expenses 5,429,582 4,924,759

INCOME FROM OPERATIONS 6,965,470 9,575,812

OTHER INCOME (EXPENSES)

Other income 302,269 110,301

Interest income 99,548 7,206

Total other income (expenses) 401,817 117,507

INCOME BEFORE PROVISION FOR

INCOME TAXES AND

NONCONTROLLING INTEREST 7,367,287 9,693,319

PROVISION FOR INCOME TAXES 1,051,259 1,357,097

NET INCOME BEFORE

NONCONTROLLING INTEREST 6,316,028 8,336,222

Less: Net loss attributable to

noncontrolling interest (17,632) --

NET INCOME ATTRIBUTABLE TO

CONTROLLING INTEREST 6,333,660 8,336,222

OTHER COMPREHENSIVE INCOME

Foreign currency translation

adjustment 487,820 69,294

COMPREHENSIVE INCOME $ 6,821,480 $ 8,405,516

BASIC EARNINGS PER SHARE

Weighted average number of shares 27,595,541 27,588,598

Earnings per share $ 0.23 $ 0.30

DILUTED EARNINGS PER SHARE

Weighted average number of shares 28,405,959 28,298,850

Earnings per share $ 0.22 $ 0.29

Source: China Fire & Security Group, Inc.
Related Stocks:
NASDAQ:CFSG
collection