China Linen Textile Industry, Ltd. Announces $17.6 million in Revenue and $0.20 in EPS for the First Half of 2010

Aug 31, 2010, 09:20 ET from China Linen Textile Industry, Ltd.

LANXI COUNTY, China, Aug. 31 /PRNewswire-Asia-FirstCall/ -- China Linen Textile Industry, Ltd. (OTC Bulletin Board: CTXIF) ("China Linen" or the "Company"), a China-based company engaged in the production and sale of linen yarn and various types of linen fabric, today announced its first and second quarter 2010 financial results.

    -- Six-month 2010 revenue increased 26.9% to 17.6 million over the same
       period in 2009.
    -- Six-month net income increased 50.3% to $4.0 million with EPS of $0.20
       vs. $0.13 during the same period in 2009.
    -- Reiterates 2010 revenue guidance of $38.1 million and 2010 net income
       guidance of $9.3 million, representing anticipated year-over-year
       growth of approximately 29.6% and 63.2%, respectively.


    SUMMARY FINANCIALS

    First Quarter 2010 Results (unaudited)

                                       Q1 2010        Q1 2009       CHANGE
    Net Sales                        $8.8 million  $5.5 million     +58.7%
    Gross Profit                     $2.7 million  $1.1 million    +139.0%
    Net Income                       $2.1 million  $1.1 million     +89.8%
    EPS (Diluted)                           $0.10         $0.06     +89.1%


    Second Quarter 2010 Results (unaudited)

                                       Q2 2010        Q2 2009       CHANGE
    Net Sales                        $8.8 million  $8.3 million      +5.7%
    Gross Profit                     $2.7 million  $2.5 million      +7.4%
    Net Income                       $1.9 million  $1.6 million     +22.5%
    EPS (Diluted)                           $0.10         $0.08     +21.8%


    Six-Month 2010 Results (unaudited)

                                     6-Month 2010  6-Month 2009    CHANGE
    Net Sales                       $17.6 million $13.9 million    +26.9%
    Gross Profit                     $5.4 million  $3.7 million    +48.3%
    Net Income                       $4.0 million  $2.7 million    +50.3%
    EPS (Diluted)                           $0.20         $0.13    +49.6%

First Quarter Ended March 31, 2010 Financial Results

Revenue for the first quarter of 2010 increased 58.7% to approximately $8.8 million, compared to $5.5 million for the first quarter of 2009. The increase was primarily due to increased marketing efforts which resulted in an increase in sales of linen fabric of $3.8 million, or 77.0%. The Company focused on linen fabric which generated 100% of revenue during the first quarter of 2010, while linen fabric contributed 90.0% of revenue in the first quarter of 2009 with 10% revenue generated from subcontracting linen fabric and linen yarn to fully utilize the Company's production capacity.

Cost of goods sold for the three months ended March 31, 2010 was approximately $6.1 million or 69.1% of revenue, as compared to $4.4 million or 79.5% of revenue for the three months ended March 31, 2009. Gross profit for the first quarter of 2010 was $2.7 million with gross margins of 30.9%, compared to $1.1 million in gross profit and gross margins of 20.5% for the first quarter of 2009. The increase in gross profit was due to the increased sales volumes of higher margin linen fabric in the first quarter of 2010.

Operating expenses for the three months ended March 31, 2010 were approximately $0.5 million, an increase of 69.0% compared to the same period in 2009. The increase was primarily due to the increased expenses in connection with its public company compliance efforts.

Operating income for the first quarter of 2010 totaled approximately $2.2 million, a 165.9% increase from $0.8 million reported for the first quarter of 2009. Operating margins were 24.8% and 14.8% for the first quarter of 2010 and 2009, respectively. The improvement in our operating margin was due to increased revenue and improved expense management.

Other income totaled $0.5 million for the first quarter of 2010, as compared to $0.7 million in the same period of 2009, representing a decrease of $0.2 million, or approximately 19.4%. This decrease is mainly due to a decrease of $0.2 million in government subsidies received by the Company in the first quarter of 2010, as compared to the same period in 2009.

Net income was approximately $2.1 million for the first quarter of 2010, an 89.8% increase from $1.1 million reported for the first quarter of 2009. The increase in net income was primarily attributable to an increase of $3,250,024 in revenue as compared to the same period in 2009. Diluted earnings per share increased 89.1% to $0.10 for the first quarter of 2010 compared to $0.06 for the first quarter of 2009, based upon 20.2 million and 20.1 million diluted common shares outstanding, respectively. The increase in diluted earnings per share was attributable to an increase of $1 million in net income as compared to the same period in 2009.

Second Quarter Ended June 30, 2010 Financial Results

Revenue for the second quarter of 2010 increased 5.7% to $8.8 million compared to $8.3 million for the second quarter of 2009, primarily resulting from an increase in sales of linen fabric of $643,473 (8%). The increase in sales of our linen fabric can be attributed to our increased efforts in marketing such fabric. For the second quarter of 2010, the sales of linen fabric increased $0.7 million, or approximately 8% as compared to the same period in 2009.

For the three months ended June 30, 2010, cost of goods sold was $6.1 million, compared to $5.8 million in the second quarter of 2009, and gross profit was $2.7 million, compared to gross profit of $2.5 million in the second quarter of 2009. Second quarter 2010 gross margins were 30.8% compared to 30.3% in the second quarter of 2009.

Operating expenses for the second quarter of 2010 were approximately $0.4 million, compared to $0.1 million in the year ago period. General and administrative expenses were higher in the second quarter of 2010 mainly due to costs associated with being a public company. Operating income for the second quarter of 2010 totaled $2.3 million compared to operating income of $2.4 million in the second quarter of 2009, representing an operating margin of 26.0% and 29.0%, respectively.

Net income for the second quarter of 2010 increased 22.5% to $1.9 million, compared to second quarter 2009 net income of $1.6 million. The increase in net income was primarily attributable to an increase of $475,886 in revenue as compared to the same period in 2009. Diluted earnings per share increased 21.8% to $0.10 for the second quarter of 2010 compared to $0.08 for the second quarter of 2009, based upon 20.2 million and 20.1 million diluted common shares outstanding, respectively.

"We are pleased to report strong revenue and earnings growth during the first half of the year, which resulted from our increased marketing efforts, higher average selling prices for linen fabric, and the strong demand for our linen fabric in both domestic and international markets," stated Mr. Gao Ren, Chairman and President of China Linen. "We have seen an increase in demand from domestic and international customers this year due to the recovery of the global economy and the increasing awareness of the benefits of natural textiles, such as linen, among consumers."

Six Months Ended June 30, 2010 Financial Results

For the six months ended June 30, 2010, revenue increased approximately 26.9% to $17.6 million compared to the same period in 2009, primarily resulting from an increase in sales of linen fabric of $4.4 million (33.4%). The increase in sales of our linen fabric can be attributed to our increased efforts in marketing such fabric. Gross profit was approximately $5.4 million for the first six months of 2010, representing an increase of 48.3% from the first six months of 2009. Gross margins improved 440 basis points to 30.8% for the first six months of 2010 compared to the year ago period

Income from operations was $4.5 million for the first six months of 2010, representing an increase of 38.1% over the first six months of 2009. Operating margins were 25.4% for the first six months of 2010, compared to 23.3% for the first six months of 2009. The improvement of operating margin was due to increased revenue and improved expense management.

Net income was $4.0 million for the six months ended June 30, 2010, an increase of approximately 50.3% from the same period in 2009. The increase in net income was primarily attributable to an increase of $3,725,910 in revenue as compared to the same period in 2009. Fully diluted earnings per share increased 49.6% to $0.20 for the first six months of 2010, compared to $0.13 for the first six months of 2009, based up on 20.2 million and 20.1 million fully diluted shares outstanding, respectively.

Balance Sheet and Cash Flow

Cash and cash equivalents totaled $3.9 million on June 30, 2010, compared to $2.3 million on December 31, 2009. Accounts receivable balance was approximately $10.9 million on June 30, 2010, versus approximately $8.8 million on December 31, 2009. Days sales outstanding (DSO) for the first six months of 2010 were at 113 days, compared to 136 days for the same period in 2009. The decrease was primarily due to increased efforts in collecting the outstanding payment. The Company had a current ratio of 2.3 to 1 and stockholders' equity of $25.7 million, with total assets of $40.2 million versus total liabilities of $14.6 million on June 30, 2010.

For the first six months of 2010, the Company generated $2.1 million in cash from operations versus $1.4 million for the same period in 2009.

"Our enhanced international market expansion is anticipated to introduce more customers and orders to generate incremental revenues for the balance of 2010. The addition of new production capacity from the lease agreement signed in July 2010 enables us to fulfill more of those orders and improve our 2010 financial performance. Combined with our increased marketing efforts, higher average selling prices for linen fabric, and the strong demand for our linen fabric in both domestic and international markets, these expansion efforts give us confidence in meeting our 2010 revenue and earnings guidance."

About China Linen Textile Industry, Ltd.

China Linen Textile Industry, Ltd. ( http://www.chinalinen.cc/ ) is principally engaged in the production and sale of linen yarn and various types of linen fabric. The Company is also involved in consultation and R&D related to linen technology and linen products. The Company carries on all of its business activities through its subsidiary, Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd. ("Lanxi Sunrise"), established in June 2002 and located in Lanxi County, the "Homeland of Flax in China," near Harbin City in China. Lanxi Sunrise has one yarn-spinning factory and two fabric weaving factories in its 28,000 square meters of building area with a staff of 1,500 and 310 sets of world-class, advanced production machinery. Annual production capacity totals approximately 1,600 tons with 50 different types of yarn and 8 million meters of fabric with 110 types. Approximately 55 percent of its products are exported to more than 10 countries.

Forward-looking Statements

The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, including statements related to expected market trends and the Company's performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

    For further information, contact:

    China Linen Textile Industry, Ltd.
     Mr. James Shaofeng Qi, CFO
     Tel:   +86-139-1093-4932

     Mr. Xiao Weixing, IR Manager
     Tel:   +86-137-9600-2690
     Email: xiaoweixing@chinalinen.cc

    HC International, Inc.
     Scott Powell, Vice-President
     Tel:   +1-917-721-9480
     Email: scott.powell@hcinternational.net
     Web:   http://www.hcinternational.net


                      CHINA LINEN TEXTILE INDUSTRY, LTD.

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                     March 31, 2010 and December 31, 2009
                            (Stated in US Dollars)

                                                  March 31,      December 31,
                                                     2010            2009
                                                  Unaudited         Audited
                                                      $                $
    ASSETS
    Current assets
    Cash                                          6,986,300        2,320,656
    Bank checks and commercial paper                     --        1,921,610
    Accounts receivable, net                     10,541,195        8,762,516
    Inventory                                     5,393,878        4,862,855
    Prepaid expenses                              2,661,413        2,183,219
    Other receivables                               167,083          100,165
    Due from related parties                      1,447,715        2,576,579
    Governmental subsidy receivable                 542,535        1,449,331
    Deferred tax assets                             245,660          228,794
    Total current assets                         27,985,779       24,405,725
    Non-current assets
    Property, plant and equipment, net            9,055,240        9,195,907
    Land use right, net                             406,000          408,134
    Governmental subsidy receivable,
     non-current                                  3,070,395        1,882,593
    Deferred tax assets, non-current                235,732          238,600
    TOTAL ASSETS                                 40,753,146       36,130,959

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
    Bank loans                                    5,428,324        4,048,583
    Accounts payable                              4,154,612        2,565,188
    Accrued expenses and other payables           1,422,801        1,101,571
    Taxes payable                                 1,998,172        3,729,506
    Deferred revenue                                474,628          423,153
    Deferred governmental subsidy                    89,009           88,995
    Due to related parties                          747,173           74,888
    Deferred tax liabilities                        369,240          362,333
    Total current liabilities                    14,683,959       12,394,217
    Non-current liabilities
    Deferred governmental subsidy,
     non-current                                  1,939,237        1,792,482
    Deferred tax liabilities, non-current           529,238          470,648
    TOTAL LIABILITIES                            17,152,434       14,657,347

    STOCKHOLDER'S EQUITY
    Common stock
    $0.002 par value, 500,000,000 shares
     authorized; 20,215,003 shares and
     20,200,003 issued outstanding as
     of March 31, 2010 and December 31,
     2009                                            42,304           42,274
    Additional paid-in capital                    3,119,586        3,093,816
    Statutory reserves                            1,593,559        1,593,559
    Retained earnings                            17,157,712       15,060,004
    Accumulated other comprehensive
     income                                       1,687,551        1,683,959
    TOTAL STOCKHOLDER'S EQUITY                   23,600,712       21,473,612
    TOTAL LIABILITIES AND STOCKHOLDERS'
    EQUITY                                       40,753,146       36,130,959


                      CHINA LINEN TEXTILE INDUSTRY, LTD.

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              For the Three Months Ended March 31, 2010 and 2009
                            (Stated in US Dollars)

                                                     Three months ended
                                                          March 31,
                                                     2010             2009
                                                       $                $
    Revenues
    Net sales                                     8,787,093        5,537,069
    Costs of goods sold                           6,073,682        4,401,836
    Gross profit                                  2,713,411        1,135,233
    Operating expenses
    Selling expenses                                140,207          123,563
    General and administrative expenses             394,494          192,459
    Total operating expenses                        534,701          316,022
    Operating income                              2,178,710          819,211
    Other income (expense)
    Interest income                                  51,952           63,017
    Interest expense                                (81,274)         (98,885)
    Government subsidies                            532,723          692,019
    Other income/(expense)                           22,251           (4,077)
    Total other income                              525,652          652,074
    Income before tax                             2,704,362        1,471,285
    Income tax                                      606,654          366,033
    Net income                                    2,097,708        1,105,252
    Other comprehensive income
    Effects of foreign currency
     conversion                                       3,592            9,253
    Comprehensive income                          2,101,300        1,114,505

    Basic and diluted earnings per share              0.104            0.055



                      CHINA LINEN TEXTILE INDUSTRY, LTD.

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
              For the Three Months Ended March 31, 2010 and 2009
                            (Stated in US Dollars)

                                                     Three months ended
                                                           March 31,
                                                      2010            2009
    Cash Flows from Operating Activities
    Net income                                     $2,097,708     $1,105,252
    Adjustments to reconcile net income to net
     cash provided by operating activities:
    Fair value of common stock expensed for
     services                                          25,800             --
    Impairment loss on property, plant and
     equipment                                             --          4,077
    Depreciation                                      148,792        110,526
    Amortization                                        2,201          2,197
    Deferred income taxes                              51,441         52,657
    Changes in:
    Bank checks and commercial paper                1,920,220        263,620
    Accounts receivable                            (1,784,242)    (2,709,528)
    Inventory                                        (534,144)     2,323,903
    Prepaid expenses                                 (479,513)    (1,457,282)
    Other receivables                                 (66,978)      (330,772)
    Governmental subsidy, net                        (135,170)      (171,205)
    Accounts payable                                1,590,974        285,970
    Accrued expenses and other payables               321,973        375,057
    Taxes payable                                  (1,728,784)      (118,675)
    Deferred revenue                                   22,551        120,684
    Due to/from related parties                     1,828,586      1,479,807
    Net cash provided by operating activities      $3,281,415     $1,336,288

    Cash Flows from Investing Activities
    Purchase of property, plant and equipment         $(6,652)      $(77,636)
    Net cash used in investing activities             $(6,652)      $(77,636)



                      CHINA LINEN TEXTILE INDUSTRY, LTD.

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                     June 30, 2010 and December 31, 2009
                            (Stated in US Dollars)

                                                      June 30,   December 31,
                                                        2010         2009
                                                     Unaudited      Audited
                                                          $            $
    ASSETS
    Current assets
    Cash                                              3,944,211    2,320,656
    Bank checks and commercial paper                         --    1,921,610
    Accounts receivable, net                         10,884,145    8,762,516
    Inventory                                         6,794,826    4,862,855
    Prepaid expenses                                  2,691,841    2,183,219
    Other receivables                                   185,605      100,165
    Due from related parties                          1,976,962    2,576,579
    Governmental subsidy receivable                     810,937    1,449,331
    Deferred tax assets                                 246,655      228,794
    Total current assets                             27,535,182   24,405,725
    Non-current assets
    Property, plant and equipment, net                8,973,345    9,195,907
    Land use right, net                                 405,435      408,134
    Governmental subsidy receivable,
     non-current                                      3,082,833    1,882,593
    Deferred tax assets, non-current                    236,687      238,600
    TOTAL ASSETS                                     40,233,482   36,130,959

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
    Bank loans                                        3,535,339    4,048,583
    Accounts payable                                  3,411,624    2,565,188
    Accrued expenses and other payables               1,576,245    1,101,571
    Taxes payable                                     2,351,840    3,729,506
    Deferred revenue                                    812,656      423,153
    Deferred governmental subsidy                        96,246       88,995
    Due to related parties                                   --       74,888
    Deferred tax liabilities                            363,859      362,333
    Total current liabilities                        12,147,809   12,394,217
    Non-current liabilities
    Deferred governmental subsidy,
     non-current                                      1,983,501    1,792,482
    Deferred tax liabilities, non-current               472,631      470,648
    TOTAL LIABILITIES                                14,603,941   14,657,347

    STOCKHOLDER'S EQUITY
    Common stock $0.002 par value,
     500,000,000 shares authorized;
     20,215,003 shares and 20,200,003
     shares issued outstanding as of
     June 30, 2010 and December 31, 2009                 42,304       42,274
    Additional paid-in capital                        3,119,586    3,093,816
    Statutory reserves                                1,593,559    1,593,559
    Retained earnings                                19,085,193   15,060,004
    Accumulated other comprehensive income            1,788,899    1,683,959
    TOTAL STOCKHOLDER'S EQUITY                       25,629,541   21,473,612
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                          40,233,482   36,130,959



                      CHINA LINEN TEXTILE INDUSTRY, LTD.

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
               For the six months ended June 30, 2010 and 2009
                            (Stated in US Dollars)

                                Three months ended      Six months ended
                                      June 30,               June 30,
                                  2010       2009        2010       2009
                                   $          $           $          $
    Revenues
    Net sales                  8,811,932  8,336,046  17,599,025 13,873,115
    Costs of goods sold        6,098,647  5,810,884  12,172,329 10,212,720
    Gross profit               2,713,285  2,525,162   5,426,696  3,660,395
    Operating expenses
    Selling expenses              15,385     59,388     155,592    182,951
    General and
     administrative
     expenses                    410,487     50,734     804,981    243,193
    Total operating
     expenses                    425,872    110,122     960,573    426,144
    Operating income           2,287,413  2,415,040   4,466,123  3,234,251
    Other income (expense)
    Interest income               45,066     62,443      97,018    125,460
    Interest expense             (77,388)   (73,000)   (158,662)  (171,885)
    Government subsidies         216,924   (366,603)    749,647    325,416
    Other income (expense)        22,266    (86,282)     44,517    (90,359)
    Total other income           206,868   (463,442)    732,520    188,632
    Income before tax          2,494,281  1,951,598   5,198,643  3,422,883
    Income tax                   566,800    378,288   1,173,454    744,321
    Net income                 1,927,481  1,573,310   4,025,189  2,678,562
    Other comprehensive
     income
    Effects of foreign
     currency conversion         101,348     25,884     104,940     35,137
    Comprehensive income       2,028,829  1,599,194   4,130,129  2,713,699

    Basic and diluted
     earnings per share            0.095      0.078       0.199      0.133



                      CHINA LINEN TEXTILE INDUSTRY, LTD.

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
               For the Six Months Ended June 30, 2010 and 2009
                            (Stated in US Dollars)

                                                      Six months ended
                                                           June 30,
                                                   2010               2009
    Cash Flows from Operating Activities
    Net income                                 $4,025,189         $2,678,562
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
    Fair value of common stock expensed
     for services                                  25,800                 --
    Impairment loss on property, plant
     and equipment
    Depreciation                                  224,152            221,395
    Amortization                                    4,402              4,397
    Deferred income taxes                          90,379             49,198
    Changes in:
    Bank checks and commercial paper            1,921,610             37,722
    Accounts receivable                        (2,121,629)        (6,673,531)
    Inventory                                  (1,931,971)         5,551,550
    Prepaid expenses                             (508,622)        (2,200,327)
    Other receivables                             (85,440)          (568,788)
    Governmental subsidy, net                    (363,576)           171,526
    Accounts payable                              846,436           (172,914)
    Accrued expenses and other payables           474,674            480,486
    Taxes payable                              (1,377,666)           121,281
    Deferred revenue                              360,287            181,823
    Due to/from related parties                   553,945          1,479,484
    Net cash provided by operating
     activities                                 2,137,970          1,361,864

    Cash Flows from Investing Activities
    Purchase of property, plant and
     equipment                                    (21,297)           (23,053)
    Net cash used in investing
     activities                                   (21,297)           (23,053)

SOURCE China Linen Textile Industry, Ltd.



RELATED LINKS

http://www.chinalinen.cc


http://www.hcinternational.net