- 3Q09 Revenue Increases 48.2% YoY to Record High of $24.8 Million -
- 3Q09 Gross Profit Increases 41.9% YoY to $14.0 Million -
- 3Q09 Operating Income Increases 39.2% YoY to $8.5 Million -
- 3Q09 Net Income Increases 17.0% YoY to $7.6 Million -
- Reaffirm FY09 Revenue and EPS Forecast -
BEIJING, Nov. 9 /PRNewswire-Asia/ -- China Fire & Security Group, Inc. (Nasdaq: CFSG) ("China Fire" or "the Company"), a leading total solution provider of industrial fire protection systems in China, today announced its financial results for the third quarter ended September 30, 2009.
Third quarter 2009 Results
For the third quarter of 2009, revenue increased 48.2% to a record high of $24.8 million compared to $16.7 million for the same period in 2008, benefiting from higher sales of system contracting projects and product sales during the period. The Company recognized revenues from 205 total solution, product sales and maintenance contracts for the three months ended September 30, 2009 as compared to 163 contracts for the three months ended September 30, 2008.
Gross profit for the third quarter of 2009 increased by 41.9%, or $4.1 million, to $14.0 million, from $9.9 million in the same period of prior year. Gross margin for the third quarter of 2009 was 56.4%, compared to 58.9% for the same period of 2008, primarily due to the decreased gross margin of the product sales.
Operating income grew 34.4% to $8.5 million, from $6.1 million for the same period last year, driven by the strong revenue growth. Operating margin in the third quarter of 2009 was 34.4% versus 36.6% a year ago due to the lower gross margin during this period.
Operating expenses were $5.5 million for the third quarter of 2009, compared to $3.7 million for the same period of 2008. As a percentage of the total revenue, operating expense was 22.1%, decreased from 22.3% a year ago.
Tax expense was $1.3 million for an effective tax rate of 15.0%, as compared to $6,736 tax credit a year ago.
Net income was $7.6 million, an increase of $1.1 million, or 17.0%, as compared to $6.5 million for the same period of 2008. As a result, fully diluted EPS increased 16.5% to $0.27 in the third quarter of 2009, versus $0.23 in the third quarter of the prior year.
Mr. Brian Lin, Chief Executive Office of China Fire commented, "I am satisfied with our third quarter performance, as we achieved record revenue and solid profits. During the quarter, we have secured contracts from iron and steel companies, power plants, and petrochemical plants. We have also succeeded in significantly growing our international markets with notable wins in the fast-emerging power generation market in India. While our backlog at the end of the third quarter was $75 million, we continue to be excited by our growth opportunities and by our ability to command firm pricing for our total solutions. We believe that our technical strengths and leading market position will enable us to seize more growth opportunities from the world’s two most dynamic economies -- China and India."
Liquidity and Capital Resources
As of September 30, 2009, the Company had cash of $28.5 million, working capital of $84.1 million, and zero debt. During the third quarter, our accounts receivable increased by $4.1 million to $28.3 million, our DSOs increased slightly to 130 days, versus 128 days in the previous quarter.
Financial Outlook for 2009
For the full year 2009, the Company has reaffirmed its revenue guidance of $88 million to $95 million and its projected net income between $28.3 million and $29.7 million, or $1.00 to $1.05 per diluted share.
Mr. Lin commented, "As a component of China’s revitalization scheme for the iron and steel industry, the government, in its efforts to control overcapacity, recently held back on further building new production capacity. However, at the same time, the revitalization scheme also encourages our tier-1 iron and steel customers to invest in technology innovation and upgrade, and to build new plants for high-end products. We are increasingly excited about the large contract opportunities in the market of retrofitting existing iron and steel production capacities, with the further enforcement of new Fire Protection Law and the mandatory national fire codes for iron & steel plants in China. Additionally, we anticipate continued government support to substantially expand the nation’s power generation and transmission capacity and sustained momentum in the transportation and petrochemical verticals. We are also excited about the fast-growing industrialization process in India and other developing economies throughout Asia. As such, we remain focused on executing the strategies that we have consistently outlined throughout 2009.
"We remain bullish about our growth prospects, and we are confident about our strategy and our technical expertise in fire safety. We intend to continue growing our leading brand, distribution, customer base, total solution offering, and competitive advantages in the rapidly growing industrial fire protection industry."
Conference Call
The Company will hold a conference call to discuss the financial results at 8:00 a.m. ET today, November 9, 2009. The Company invites you to join the call by dialing 1-719-325-2322. 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 November 9, 2009 to November 16, 2009. Listeners may access the replay by dialing 1-719-457-0820, passcode: 5435341.
About China Fire & Security Group, Inc.
China Fire & Security Group, Inc. (NASDAQ: CFSG), through its wholly owned subsidiary, Sureland Industrial Fire Safety Limited ("Sureland"), 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, manufacture, sales and maintenance services of a broad product portfolio including detectors, controllers, and fire extinguishers. Via its nationwide direct sales force, China Fire has built a solid client base including major companies in iron and steel, power, petrochemical and transportation industries throughout China. China Fire has a seasoned management team with strong focus on standards and technologies. Currently, China Fire has a comprehensive portfolio of patents covering fire detection, system control and fire extinguishing technologies. Founded in 1995, China Fire is headquartered in Beijing with about 600 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.
Shayla Suen, Investor Relations
Tel: +86-10-8441-7400
Email: ir@chinafiresecurity.com
ICR, Inc.
In China:
Michael Tieu or Bill Zima
Tel: +86-10-6599-7960 or +86-10-6599-7969
Email: michael.tieu@icrinc.com or william.zima@icrinc.com
In the U.S.:
Brian M. Prenoveau, CFA
Tel: +1-203-682-8200
Email: brian.prenoveau@icrinc.com
(Financial Statements on the following pages)
CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
ASSETS
September 30, December 31,
2009(Unaudited) 2008
CURRENT ASSETS:
Cash and cash equivalents $28,483,011 $26,655,333
Restricted cash 1,515,385 5,377,933
Notes receivable 6,086,333 3,670,259
Accounts receivable, net of
allowance for doubtful accounts
of $6,091,865 and $4,370,362 as of
September 30, 2009 and December 31,
2008, respectively 32,408,623 25,826,343
Receivables from related party 550,517 466,223
Other receivables 1,706,124 1,532,259
Inventories 5,084,589 6,538,938
Costs and estimated earnings in
excess of billings 35,774,224 17,821,708
Employee advances 1,386,094 743,868
Prepayments and deferred expenses 3,387,997 2,816,976
Total current assets 116,382,897 91,449,840
PLANT AND EQUIPMENT, net 8,539,508 8,445,254
OTHER ASSETS:
Restricted cash - non current 3,481,274 1,872,828
Accounts receivable - retentions 3,445,092 1,107,450
Advances on building and
equipment purchases -- 249,859
Investment in joint ventures 477,838 1,167,238
Intangible assets, net of
accumulated amortization 1,059,980 1,116,449
Total other assets 8,464,184 5,513,824
Total assets $133,386,589 $105,408,918
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $7,578,793 $6,664,090
Customer deposits 2,836,162 6,102,026
Billings in excess of costs and
estimated earnings 1,260,403 4,237,528
Other payables 405,376 837,973
Accrued liabilities 11,600,618 6,785,409
Taxes payable 8,667,218 2,092,745
Total current liabilities 32,348,570 26,719,771
COMMITMENTS AND CONTINGENCIES EQUITY:
Common stock, $0.001 par value,
65,000,000 shares authorized,
27,593,275 and 27,586,593 shares
issued and outstanding as of
September 30, 2009 and December 31,
2008, respectively 27,593 27,586
Additional paid-in-capital 20,092,548 19,357,409
Statutory reserves 7,148,827 7,148,827
Retained earnings 66,385,947 44,850,181
Accumulated other comprehensive
income 7,317,511 7,305,144
Total shareholders’ equity 100,972,426 78,689,147
Noncontrolling interest 65,593 --
Total equity 101,038,019 78,689,147
Total liabilities and
equity $133,386,589 $105,408,918
CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
REVENUES
System contracting
projects $18,710,099 $15,173,858 $50,004,213 $41,060,246
Products 5,351,659 978,806 12,267,472 5,393,942
Maintenance
services 754,671 590,603 1,988,823 1,639,429
Total revenues 24,816,429 16,743,267 64,260,508 48,093,617
COST OF REVENUES
System contracting
Projects 7,821,254 6,459,973 19,598,795 18,001,928
Products 2,559,838 117,258 4,636,886 1,176,638
Maintenance
services 436,026 301,605 1,228,186 821,932
Total cost of
revenues 10,817,118 6,878,836 25,463,867 20,000,498
GROSS PROFIT 13,999,311 9,864,431 38,796,641 28,093,119
OPERATING EXPENSE
Selling and
marketing 2,470,092 1,718,929 6,610,283 5,054,642
General and
administrative 2,416,007 1,132,492 6,080,089 3,559,940
Depreciation and
amortization
expenses 197,042 123,829 573,892 445,779
Research and
development 390,029 762,382 1,224,046 1,656,983
Total
operating
expense 5,473,170 3,737,632 14,488,310 10,717,344
INCOME FROM OPERATIONS 8,526,141 6,126,799 24,308,331 17,375,775
OTHER INCOME (EXPENSE)
Other income 241,521 280,094 463,820 501,737
Other expense (5,604) (3,675) (6,906) (89,063)
Interest income, net 99,205 48,010 228,507 139,754
Total other
income 335,122 324,429 685,421 552,428
INCOME BEFORE PROVISION
FOR INCOME TAXES AND
NONCONTROLLING INTEREST 8,861,263 6,451,228 24,993,752 17,928,203
PROVISION FOR INCOME
TAXES 1,329,732 (6,736) 3,480,396 53,359
NET INCOME BEFORE
NONCONTROLLING INTEREST 7,531,531 6,457,964 21,513,356 17,874,844
Less: Net loss
attributable to
noncontrolling
interest (22,410) -- (22,410) --
NET INCOME ATTRIBUTABLE
TO CONTROLLING INTEREST 7,553,941 6,457,964 21,535,766 17,874,844
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency
translation
adjustment 121,290 173,873 12,367 3,534,472
COMPREHENSIVE INCOME $7,675,231 $6,631,837 $21,548,133 $21,409,316
BASIC EARNINGS PER SHARE
Weighted average
number of shares 27,593,275 27,572,112 27,589,489 27,562,087
Earnings per share $0.27 $0.23 $0.78 $0.65
DILUTED EARNINGS PER SHARE
Weighted average
number of shares 28,372,332 28,259,171 28,299,552 28,205,583
Earnings per
share $0.27 $0.23 $0.76 $0.63
