Nova LifeStyle, Inc. Reports Fourth Quarter and Fiscal Year 2013 Results - Fourth Quarter Net Sales Increased 9.7%; Fiscal 2013 Net Sales Increased 18.2%

- Fourth Quarter EPS of $0.07; Fiscal Year EPS of $0.25

LOS ANGELES, March 31, 2014 /PRNewswire/ -- Nova LifeStyle, Inc. (NASDAQ-GM: 'NVFY'), a U.S.-based fast growing, innovative designer and manufacturer of modern LifeStyle furniture, today announced financial results for the fourth quarter and fiscal year ended December 31, 2013.

2013 Accomplishments

  • Established supply agreement with Freedom Furniture on February 28, expanding distribution to the Australian market.
  • Gained further global recognition and tapped into emerging demand in Asia on March 11 by successfully staging the Company's highly adaptable custom designed lifestyle furnishings line in the first of multiple villa projects being developed in Chong Qing, China by the Jinyu Group, a leading real estate developer in China.
  • Established supply agreement with Harveys, England, April 5.
  • Finalized the Company's acquisition of Bright Swallow International Group Limited ("Bright Swallow") on April 24, providing the Company with access to the Canadian market.
  • Launched NOVA QwiK! line of quick-to-assemble office furniture and storage solutions, available online, on July 8.
  • Completed construction of a new plant at the Company's Nova Dongguan facilities December 18 to support Nova's upcoming supply agreement with IKEA to manufacture products for sale in China and Asia, and provide additional capacity for future growth.

Recent 2014 Accomplishments

  • Established supply agreement with HOME CENTRE in Dubai, U.A.E., on January 14.
  • Successfully up listed to NASDAQ Global Market and commenced trading under the ticker symbol NVFY on January 17.
  • Expanded product offering through a new line of living room upholstery and accent pieces and introduced an expansive selection of new dining room furniture at the Las Vegas Market on January 26.

Tawny Lam, President of Nova LifeStyle, Inc. stated, "2013 was a year of major accomplishments for our Company as we made further progress on our key growth initiatives. Specifically, we continued our innovation as we further incorporated current lifestyle trends into our product offering, introduced NOVA QwiK!, and expanded our product offering of living room and dining room pieces.  We expanded our global distribution channels through the acquisition of Bright Swallow, adding complementary product lines and geographical reach, as well as our supply agreement with IKEA  and new relationships in England and Australia. We also expanded our production capacity to accommodate current demand for our products as well as to support future growth. We are very excited about the strong growth opportunities that we believe exist for Nova LifeStyle, and I am confident that the investments we made in our business in fiscal 2013 have provided us with a solid foundation, allowing us to execute our long-term growth initiatives and capitalize on those opportunities."

Ms. Lam continued, "In 2014 we remain focused on continued product innovation as well as expanding our presence globally through further penetration of existing channels of distribution and the addition of new ones. This includes the development of our own e-commerce platform aimed at the China market, which we believe will help diversify our customer base and end-user markets, and increase profitability in the long-term. We expect to benefit from many of the new supply agreements we have in place both in the near and the longer-term as well as from initiatives to improve profit margins, and expect to increase our net income in fiscal year 2014 over fiscal 2013. Our recent listing on NASDAQ will also provide us with greater visibility in the investment community as we expand our overall global market presence."

For the fourth quarter ended December 31, 2013:

  • Net sales were $21.9 million, an increase of 9.7% compared to the prior year period. Growth was primarily driven by a 13% increase in sales volume, offset by an overall average selling price decrease of approximately 3%. Also, newly acquired subsidiary Bright Swallow contributed another $2.5 million in sales, which was offset by a 6% decrease in sales from China. Sales in China were impacted by the transition to new image standards as well as product lines for the Company's franchise operations that are expected to improve sales and profitability in the longer-term.
  • Gross profit was $3.9 million, a decrease of 4.8% compared to the prior year period. Gross margin was 17.7% compared to 20.4% in the prior year period and primarily reflects a mix shift compared to the prior year period.
  • Operating income was $1.3 million compared to $1.9 million in the prior year period, primarily reflecting the lower gross margin.
  • Net income was $1.3 million, or $0.07 per diluted share, based on a weighted average diluted share count of 19.4 million shares.  This compares to net income in the prior year period of $1.8 million, or $0.10 per diluted share, based on a weighted average diluted share count of 18.6 million shares.    

For the fiscal year ended December 31, 2013:

  • Net sales were $78.4 million, an increase of 18.2% compared to the prior year. The increase was primarily driven by a 45% increase in sales in North America including a 31% increase in sales by subsidiary Diamond Bar and the integration of the operations of Bright Swallow, offset by a 7.0% decline in sales to China and a 3.9% decrease in sales to Europe. Sales in China were impacted by the transition to new image standards as well as product lines for the Company's franchise operations that are expected to improve sales and profitability in the longer-term.  
  • Gross profit was $15.4 million, an increase of 4.3% compared to the prior year. Gross margin was 19.6% compared to 22.2% in the prior year and primarily reflects a mix shift as well as labor cost increases due to continuous inflation in China and increased factory overhead. Profit margin was also impacted by the strategic decision to offer more favorable pricing to major customers in order to solidify the Company's channels of distribution and capture broader market share.
  • Operating income was $6.1 million compared to $6.7 million in the prior year, reflecting lower gross margins, offset by a 20 basis point reduction in the Company's selling, general and administrative expenses as a percentage of sales.
  • Net income was $4.9 million, or $0.25 per diluted share, based on a weighted average diluted share count of 19.1 million shares.  This compares to net income in the prior year of $5.4 million, or $0.29 per diluted share, based on a weighted average diluted share count of 18.7 million shares.    

About Nova LifeStyle, Inc.

Nova LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company headquartered in California, is a fast growing, innovative designer and manufacturer of modern LifeStyle furniture; primarily sofas, dining rooms, cabinets, office furniture and related components, bedrooms, and various accessories in matching collections. Nova's products are made in the US, Europe, and Asia and include LifeStyle brands such as Diamond Sofa, Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow International. Nova's products feature urban contemporary styles that integrate comfort and functionality incorporating upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe, and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit our website at www.NovaLifeStyle.com.

Safe Harbor Statement

All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2013 AND 2012


2013


2012

Assets








Current Assets




Cash and cash equivalents

$            2,323,338


$              3,150,492

Accounts receivable, net

27,967,831


22,387,517

Advance to suppliers

3,535,100


3,105,584

Inventories

3,353,634


3,240,721

Prepaid expenses and other receivables

648,620


179,713

Income tax receivable

38,654


--

Deferred tax asset

243,682


157,423





Total Current Assets      

38,110,859


32,221,450





Noncurrent Assets




 Heritage and cultural assets

132,993


129,002

Plant, property and equipment, net

13,146,638


8,551,114

Construction in progress

1,024,645


5,374,056

Acquisition deposit

--


3,000,000

Lease deposit

103,122


43,029

Goodwill

1,027,124


218,606

Intangible assets, net

6,976,991


1,216,092

 Deferred tax asset, net

44,334


--





Total Noncurrent Assets

22,455,847


18,531,899





Total Assets      

$          60,566,706


$            50,753,349





Liabilities and Stockholders' Equity








Current Liabilities




Accounts payable 

$            6,895,254


$              7,123,534

Line of credit

820,089


6,529,178

Advance from customers

43,077


257,191

Accrued liabilities and other payables

1,458,157


1,495,835

Taxes payable

-


272,159





Total Current Liabilities

9,216,577


15,677,897





Noncurrent Liabilities




 Line of credit

6,602,258


-

Deferred rent payable

74,152


55,902

Deferred tax liability, net

--


45,370

Income tax payable

5,944,424


4,608,592





Total Noncurrent Liabilities

12,620,834


4,709,864





Total Liabilities

21,837,411


20,387,761





Contingencies and Commitments








Stockholders' Equity




Common stock, $0.001 par value; 75,000,000 shares authorized, 19,206,024 and 18,536,567 shares issued and outstanding as of December 31, 2013 and 2012

19,206


18,537

Additional paid-in capital

20,977,058


19,107,845

Subscription receivable

(750,000)


(1,950,000)

Statutory reserves

6,241


6,241

Accumulated other comprehensive income 

2,603,010


2,176,646

Retained earnings 

15,873,780


11,006,319





Total Stockholders' Equity

38,729,295


30,365,588





Total Liabilities and Stockholders' Equity

$          60,566,706


$            50,753,349









 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME







Years Ended December 31,



2013


2012





Net Sales 

$                      78,356,493


$                  66,297,498







Cost of Sales

62,990,736


51,572,076







Gross Profit

15,365,757


14,725,422







Operating Expenses





Selling expenses

3,345,903


3,158,191


General and administrative expenses

5,921,091


4,788,947


Loss on disposal of plant, property and equipment

37,879


123,675







Total Operating Expenses

9,304,873


8,070,813







Income From Operations

6,060,884


6,654,609







Other Income (Expenses)





Non-operating expense

(217,221)


50,915


Foreign exchange transaction gain 

(71,296)


47


Interest expense

(292,291)


(188,868)


Financial expense

(13,273)


(11,166)







Total Other Expenses, Net

(594,081)


(149,072)







Income Before Income Tax

5,466,803


6,505,537







Income Tax Expense

599,342


1,071,654







Net Income

4,867,461


5,433,883







Other Comprehensive Income





Foreign currency translation

426,364


37,672







Comprehensive Income

$                        5,293,825


$                    5,471,555







Basic weighted average shares outstanding

18,876,052


18,530,591


Diluted weighted average shares outstanding

19,122,386


18,681,448







Basic net earnings per share 

$                                 0.26


$                             0.29


Diluted net earnings per share 

$                                 0.25


$                             0.29


 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012


2013


2012





Cash Flows From Operating Activities




 Net Income 

$                4,867,461


$                  5,433,883

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

1,324,881


764,596

Deferred tax expense (benefit)

(171,938)


163,370

Stock compensation expense 

581,640


57,292

Warrants expense

76,629


--

Loss on fixed assets disposal

37,879


123,675

Bad debt allowance

52,188


225,897

Changes in operating assets and liabilities:




Accounts receivable

(3,155,909)


(3,624,756)

Accounts receivable - related party

--


28,289

Advance to suppliers

(411,706)


(2,753,569)

Inventories

(53,035)


(1,386,750)

Other current assets

(106,268)


(32,900)

Accounts payable 

(3,008,918)


351,846

Advance from customers

(216,523)


165,291

Accrued expenses and other payables

(181,904)


658,371

Deferred rent payable

16,209


(3,178)

Taxes payable

392,076


655,505





Net Cash Provided by  Operating Activities

42,762


826,862





Cash Flows From Investing Activities




     Deposit on acquisition of Bright Swallow Int'l Group Ltd.

--


(3,000,000)

     Acquisition of Bright Swallow

(3,500,000)


--

     Cash acquired from acquisition of Bright Swallow 

342,029


--

     Cash received from fixed assets disposal

1,350


8,363

    Acquisition of intangible asset

--


(538,614)

    Purchase of property and equipment

(502,081)


(651,805)

    Construction in progress

(317,252)


(4,626,107)





Net Cash Used in Investing Activities

(3,975,954)


(8,808,163)





Cash Flows From Financing Activities




      Repayment to related parties

(1,987)


--

      Proceeds from subscription receivable

1,200,000


--

      Proceed from line of credit and bank loan

18,344,000


6,522,139

      Repayment to line of credit and bank loan

(17,485,192)


--

    Cash proceeds from private placement, net

--


1,753,849

    Due from factor

--


203,351

    Cash received from warrants exercised

1,021,614


142,600





Net Cash Provided by Financing Activities

$                3,078,435


$                  8,621,939

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

$                     27,603


 

$                         4,675





Net (decrease) / increase in cash and cash equivalents

(827,154)


645,313





Cash and cash equivalents, beginning of year

3,150,492


2,505,179





Cash and cash equivalents, ending of year

$                2,323,338


$                  3,150,492





Supplemental Disclosure of Cash Flow Information

Cash paid during the year for:




Income tax payments

$                   364,053


$                     269,316

        Interest expense

$                   267,019


$                     121,403





Supplemental Disclosure of Non-Cash Financing Activities

      Construction deposit transfer to construction in progress

$                             --


$                     633,212

      Construction in progress transfer to fixed assets

$                4,747,665


$                               --

 

 

Investor Contact:

ICR, Inc.
Anne Rakunas
Tel: (310) 954-1113
Anne.Rakunas@icrinc.com

SOURCE Nova LifeStyle, Inc.



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