First Quarter and Recent Highlights:
-- Revenue Increased 43% year over year to $9.5 million
-- Income from Operations increased 55% to $3.3 million with Operating
Margins improving 2.7% versus Last Year to 35%
-- Proforma EPS Improves 33% to $0.12
-- Company signs Amendment with Series A and Series B warrant holders
leading to the Elimination of the Change in Fair Value of Derivates
from Income Statement beginning in the Third Quarter 2007
-- Four New Board Members added to Complete Independent Board, Company
Applies for Nasdaq Capital Market Listing
BEIJING, May 14 /Xinhua-PRNewswire/ -- China Fire & Security Group, Inc. (OTC Bulletin Board: CFSG) "China Fire", a leading industrial fire protection products and solutions provider in China, today announced their financial results for the first quarter ending March 31, 2007.
For the first quarter of 2007, revenue increased 42.8 percent to $9.5 million compared to $6.7 million for the same period in 2006. This increase was a result of improving sales execution and further penetration of the Company's customer base in the iron and steel industries while continuing to successfully deliver more products and total solutions to industrial customers. Total solutions accounted for 76.6 percent of revenue with product sales representing 22.1 percent and maintenance comprising the remaining revenue. Gross profit was $5.0 million during the first quarter 2007 compared to $3.5 million last year, an increase of 42.7 percent. Gross margins of 52.8 percent were unchanged versus last year but improved sequentially as the Company sold a higher mix of proprietary products compared to the fourth quarter of last year.
Operating expenses increased 24.5 percent to $1.7 million for the first quarter compared to $1.4 million last year with the year over year increase primarily related to higher public company expenses. Income from operations was $3.3 million, representing a 54.7 percent increase from the same period last year. Operating margins for the period were 34.5 percent compared to 31.8 percent in the first quarter of 2006 as the Company focused on controlling costs and improving profitability.
During the first quarter of 2007 the Company recorded a gain of $0.8 million which was related to the partial reversal of the change in fair value of derivative charges associated with the Company's Series A and Series B warrants incurred in the fourth quarter of 2006 as compared to no such gain last year. Net income for the period was $4.1 million compared to $2.2 million, an increase of 89.0 percent with weighted average per fully diluted share increasing 66.7 percent to $0.15 compared to $0.09 last year. Excluding non-cash benefits proforma net income was $3.3 million for the first quarter 2007 or a 33 percent increase to $0.12 per weighted average fully diluted share. As of the end of the quarter the Company had 27.0 million fully diluted shares outstanding.
"We are pleased to sign the amendment with our shareholders in regards to the Series A and Series B warrants to remove certain stipulations that were forcing us to count the warrants as derivative instruments," Mr. Lin continued. "Cumulatively between the fourth quarter of 2006 and the first quarter of 2007 we incurred $0.8 million in non cash expenses related these items. With this liability now removed we anticipate the elimination of these non-cash variables beginning in the third quarter of this year thus making it easier for investors to discern our financial progress."
The Company ended the quarter with a strong financial position. Cash and restricted cash totaled $10.7 million on March 31, 2007. Current assets increased 6.3 percent to $46.4 million versus last year with the Company reporting working capital of $26.6 million. The Company has no long-term debt with shareholder's equity of $29.5 million.
"The pace of business through the first quarter has tracked in line with our internal expectations and is consistent with our "make good" target for 2007 of $13.0 million in net income and $0.46 per fully diluted earnings per share," Mr. Lin concluded. "As we look forward we anticipate signing new contracts with customers while expanding our product portfolio and increasing our domestic market share."
Teleconference Information:
The conference call will take place at 4:30 p.m. EST on Monday May 14th, 2007. Interested participants should call 866-406-5369 when calling within the United States or 973-582-2847 when calling internationally. There will be a playback available until 11:59 p.m. eastern time May 21, 2007. To listen to the playback, please call 877-519-4471 when calling within the United States or +1-973-341-3080 when calling internationally. Please use pass code 8789379 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00003F2F or at ViaVid's website at http://www.viavid.net . The webcast can be accessed through June 14, 2007.
About China Fire & Security Group, Inc.
China Fire & Security Group, Inc., through its wholly owned subsidiaries, Sureland Industrial Fire Safety Limited ("Sureland") and Sureland Industrial Fire Equipment (Beijing) Limited ("Sureland Equipment"), is engaged primarily in the design, development, manufacture and sale in China of a variety of fire safety products for the industrial fire safety market and the design and installation of industrial fire safety systems in which it uses its own fire safety products. It also provides maintenance services for customers of its industrial fire safety systems.
Headquartered in Beijing with over 30 sales and project offices throughout China, Sureland markets its industrial fire safety products and systems primarily to major companies in the iron and steel, power and petrochemical industries in China. It is developing and expanding its business in other industrial sectors including transportation, wine and tobacco, vessels, nuclear energy, and public space markets.
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, and statements about industry trends and China Fire & Security Groups' future performance, operations and products. This and other "Risk Factors" contained in China Fire & Security Groups' public filings with the SEC.
CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS UNIPRO FINANCIAL SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2007 AND DECEMBER 31, 2006
A S S E T S
March 31, December 31,
2007 2006
Unaudited
CURRENT ASSETS:
Cash $ 9,921,357 $ 9,426,091
Restricted cash 733,079 1,622,833
Accounts receivable, net of allowance for
doubtful accounts of $1,372,329 and
$1,252,947 as of March 31, 2007 and
December 31, 2006, respectively 14,679,031 13,262,040
Accounts receivable - related party 336,433 333,056
Notes receivable 984,200 903,425
Other receivables 1,338,849 785,111
Other receivables - related party 90,920 90,008
Inventories 3,549,366 4,190,830
Costs and estimated earnings in excess of
billings 9,846,489 9,020,122
Employee advances 1,999,290 1,648,560
Prepayments and deferred expenses 2,931,053 2,396,571
Total current assets 46,410,067 43,678,647
PLANT AND EQUIPMENT, net 3,669,210 3,529,808
OTHER ASSETS:
Deferred expenses - non current -- 40,830
Investment in Tianjin Fire Safety Equipment
Co. Ltd. 506,371 501,288
Intangible assets - land use right, net of
accumulated amortization 560,554 558,255
Total other assets 1,066,925 1,100,373
Total assets $ 51,146,202 $ 48,308,828
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 4,830,955 $ 5,796,979
Accounts payable - related party -- 320,754
Customer deposits 5,193,027 2,713,451
Billings in excess of costs and estimated
earnings 6,886,639 8,867,624
Other payables 620,901 388,434
Other payables - related party 523 50,523
Accrued liabilities 2,139,075 1,891,628
Taxes payable 159,084 619,949
Total current liabilities 19,830,204 20,649,342
DERIVATIVE INSTRUMENT LIABILITIES 1,846,648 2,680,811
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Common stock, $0.001 par value, 65,000,000
shares authorized, 26,461,678 shares
issued and outstanding 26,462 26,462
Additional paid-in-capital 13,458,171 13,393,171
Statutory reserves 3,728,127 3,728,127
Retained earnings 10,895,509 6,765,393
Accumulated other comprehensive income 1,361,081 1,065,522
Total shareholders' equity 29,469,350 24,978,675
Total liabilities and shareholders'
equity $ 51,146,202 $ 48,308,828
CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS UNIPRO FINANCIAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(Unaudited)
2007 2006
REVENUES $ 9,499,460 $ 6,654,350
COST OF REVENUES 4,483,555 3,138,374
GROSS PROFIT 5,015,905 3,515,976
OPERATING EXPENSE
Selling and marketing 551,410 581,900
General and administrative 1,011,044 501,729
Depreciation and amortization 126,483 136,889
Research and development 50,295 176,972
Total operating expense 1,739,232 1,397,490
INCOME FROM OPERATIONS 3,276,673 2,118,486
OTHER INCOME (EXPENSE)
Change in fair value of derivative
instruments 834,163 --
Other income, net of other expense 19,280 99,101
Total other income (expense) 853,443 99,101
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 4,130,116 2,217,587
PROVISION FOR INCOME TAXES -- 13,656
NET INCOME BEFORE MINORITY INTEREST 4,130,116 2,203,931
MINORITY INTEREST -- 18,890
NET INCOME 4,130,116 2,185,041
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment 295,559 87,684
COMPREHENSIVE INCOME $ 4,425,675 $ 2,272,725
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC 26,461,678 24,000,000
WEIGHTED AVERAGE NUMBER OF SHARES -
DILUTED 27,001,528 24,000,000
EARNING PER SHARE - BASIC $ 0.16 $ 0.09
EARNING PER SHARE - DILUTED $ 0.15 $ 0.09
For more information, please contact:
Matt Hayden
HC International
Tel: +1-858-704-5065
Brian Lin, CEO
Chine Fire & Security Group, Inc.
Tel: +86-10-8589-7509
