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.

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http://www.chinafiresecurity.com