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China Fire & Security Group, Inc. Announces First Quarter 2007 Results
Monday May 14, 9:01 am ET 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."
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
Source: China Fire & Security Group, Inc.