- 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

SOURCE China Fire & Security Group, Inc.

Back to top

RELATED LINKS
http://www.chinafiresecurity.com