Nova Lifestyle, Inc. Reports Third Quarter 2011 Revenue Up 61%, Net Income Up 94%, Provides 2012 Financial Guidance

News provided by

Nova LifeStyle, Inc.

Nov 15, 2011, 07:00 ET

COMMERCE, Calif., Nov. 15, 2011 /PRNewswire/ -- Nova Lifestyle, Inc. ("Nova" or "Nova Lifestyle") (OTCBB: STVS)(website: www.novalifestyle.com), an innovative global designer and modern lifestyle furniture company headquartered in California, today announced its financial results for the third quarter ended September 30, 2011, as reported on its quarterly report on Form 10-Q filed on November 14, 2011.

THIRD QUARTER 2011 HIGHLIGHTS

  • Record revenue of $11.2 million, an increase of 61% year-over-year
  • Gross profit increased 102% to $3.19 million
  • Gross margin increased to 29% from 23% in the same period last year
  • Record net income of $1.7 million, an increase of 94% year-over-year
  • Net margins increased to 15% from 12% in the same period 2010
  • Acquired Diamond Sofa (www.diamondsofa.com), an urban contemporary national furniture brand sold to major U.S. furniture companies
  • 2012 Guidance: Anticipate revenue of between $73 and $75 million and net income of between $13 and $14 million from organic growth


Three Months
Ended

September 30,
2011

Three Months
Ended

September 30,
2010

YoY%
Change

Revenue

$

11,187,474

$

6,945,017


61%

Gross Profit

$

3,192,702

$

1,583,374


102%

Gross Profit Margin

29%


23%




Operating Income

$

2,000,388

$

1,057,594


89%

Operating Margin

18%


15%




Net Income

$

1,681,589

$

865,218


94%

Net Income Margin

15%


12%




Diluted EPS

$

0.10

$

0.09


11%

MANAGEMENT COMMENTS

Tawny Lam, President of Nova Lifestyle, commented: "We are pleased with our strong growth and performance in the third quarter of 2011. Our acquisition of Diamond Sofa, a well-recognized brand in the U.S. with a niche in the urban contemporary furniture market, provides us with a strong distribution channel to the top 100 U.S. furniture companies. We look forward to expanding our e-commerce business and continuing to market our Nova-branded products to the international markets. Our strong revenue and net income growth, as well as our increase in margins, demonstrate consumers' appetite for our modern contemporary products. We look forward to a year of record revenue and earnings in 2011."

REVENUE

Revenue was $11.19 million in the third quarter 2011, an increase of $4.24 million or 61% year-over-year. The increase in revenue was due to a 66% increase in sales volume as well as our acquisition of the Diamond Sofa brand, which contributed $1.04 million in additional sales for the quarter. Our largest selling product categories for the third quarter 2011 were chairs, sofas and cupboards, which accounted for approximately 19%, 18% and 17% of sales. Sales to international markets increased $4.00 million year-over-year to $8.5 million in the third quarter 2011, principally as a result of our increased sales in North America. Overall sales in China also increased, with sales of $2.69 million in the third quarter 2011 compared to $2.44 million in 2010. Sales from franchisees selling Nova-branded products in China contributed approximately $1.49 million, constituting 58% of total China sales during the third quarter 2011, compared to $0.44 million or 18% in the same period of 2010. Nova commenced sales through branded franchise stores in the first half of 2010 and anticipates increasing sales volume in China as we continue to expand our franchise network.

GROSS PROFIT

Gross profit increased 102% to $3.19 million in the third quarter 2011. Gross profit margin increased to 29% in third quarter 2011 from 23% in the same period last year, primarily as a result of increased sales volume and changes in our sales and marketing strategy to expand in the U.S. and China markets. Management believes that gross profit margin will stabilize at approximately 30% going forward as our product mix broadens, sales volume increases and Nova adjusts pricing based on rising raw material costs.

OPERATING EXPENSES

Operating expenses, consisting of selling, general and administrative expenses, were $1.19 million for the third quarter 2011, an increase of 127% compared to the same period last year, as expected. Selling expense increased as we continued expanding in the China retail market by hiring additional sales staff and increasing advertising and promotional marketing. General and administration expense increased because of costs associated with workforce expansion in China and expense related to our acquisitions in 2011 of Nova Furniture and the Diamond Sofa brand.

NET INCOME

Net income was $1.68 million in the third quarter 2011, an increase of 94% year-over-year. Net profit margin was 15%, an increase of 3% from the 2010 period.

ABOUT NOVA LIFESTYLE, INC.

Nova Lifestyle, Inc., a U.S. company headquartered in California, is an innovative designer and modern lifestyle furniture company. Nova's products are made in the U.S. and Asia, and marketed worldwide. Nova's collections of lifestyle furniture brands include Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili and others. Nova's products feature urban contemporary styles with comfort and functionality in matching furniture collections and upscale luxury designs appealing to lifestyle-conscious middle and upper middle-income consumers. To learn more about Nova Lifestyle, Inc., please visit 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.

CORPORATE CONTACT:
Tawny Lam
President, Nova Lifestyle, Inc.
Tel: (323) 888-9999
Email: [email protected]
www.novalifestyle.com
www.diamondsofa.com

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010


September 30,
2011

December 31,
2010


(Unaudited)



Assets












Current Assets





    Cash and cash equivalents

$

4,175,068

$

985,004

    Accounts receivable

12,070,744


5,921,872

    Accounts receivable - related party

263,678


565,170

    Advance to suppliers

352,201


277,081

    Inventory

1,513,444


1,017,704

    Other current assets

246,479


175,323

    Deferred tax asset

120,093


115,237


















Total Current Assets

18,741,707


9,057,391


















Noncurrent Assets







    Heritage and cultural assets

127,859


--

    Plant, property and equipment, net

8,659,805


8,192,937

    Construction in progress

--


75,498

    Other assets

631,772


--

    Goodwill

218,606


--

    Intangible assets, net

730,685


471,812


















Total Noncurrent Assets

10,368,727


8,740,247


















Total Assets

$

29,110,434

$

17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010


September 30,
2011

December 31,
2010


(Unaudited)




Liabilities and Stockholders' Equity
















Current Liabilities







    Accounts payable

$

4,377,464

$

1,160,634

    Advance from customers

--


25,016

    Accrued expenses and other payables

780,423


1,065,421

    Taxes payable

635,349


197,785

    Due to related party

--


197,776









Total Current Liabilities

5,793,236


2,646,632









Noncurrent Liabilities







    Deferred rent payable

55,083


43,169

    Deferred tax liability, net

18,329


1,274

    Income tax payable

2,586,224


2,368,795









Total Noncurrent Liabilities

2,659,636


2,413,238









Total Liabilities

8,452,872


5,059,870









Contingencies and Commitments
















Stockholders' Equity







    Common stock, $0.001 par value; 75,000,000 shares authorized,

    17,898,267 and 11,920,000 shares issued and outstanding

    as of September 30, 2011, and December 31, 2010, respectively

17,898


11,920

    Additional paid-in capital

17,074,535


10,900,580

    Subscription receivable

(1,950,000)


--

    Statutory reserves

6,241


6,241

    Accumulated other comprehensive income

2,034,960


1,611,756

    Retained earnings

3,473,928


207,271









Total Stockholders' Equity

20,657,562


12,737,768









Total Liabilities and Stockholders' Equity

$

29,110,434

$

17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)


Nine Months Ended September 30,

Three Months Ended September 30,


2011

2010

2011

2010













Net Sales                                                                       

(Including sales to related party of $902,638 and $1,154,971 during the nine months ended September 30, 2011 and 2010; and $277,056 and $414,335 during the three months ended September 30, 2011 and 2010, respectively)

$

26,079,694

$

22,040,134

$

11,187,474

$

6,945,017

















Cost of Sales

18,645,205


16,856,588


7,994,772


5,361,643

















Gross Profit

7,434,489


5,183,546


3,192,702


1,583,374

















Operating Expenses















    Selling expenses

1,216,546


722,119


421,437


246,354

    General and administrative expenses

2,187,875


795,379


770,877


279,426

















Total Operating Expenses

3,404,421


1,517,498


1,192,314


525,780

















Income From Operations

4,030,068


3,666,048


2,000,388


1,057,594

















Other Income (Expenses)















    Non-operating income

21,719


12,654


11,245


11,950

    Foreign exchange transaction gain (loss)

(79,450)


16,890


(18,721)


19,029

    Financial expense

(49,821)


(15,849)


(33,499)


(4,085)

















Total Other Expenses, Net

(107,552)


13,695


(40,975)


26,894

















Income Before Income Tax

3,922,516


3,679,743


1,959,413


1,084,488

















Income Tax Expense

655,859


732,108


277,824


219,270

















Net Income

3,266,657


2,947,635


1,681,589


865,218

















Other Comprehensive Income















    Foreign currency translation

423,204


201,567


187,219


135,480

















Comprehensive Income

$

3,689,861

$

3,149,202

$

1,868,808

$

1,000,698

















Basic weighted average shares outstanding

13,451,350


9,685,000


16,431,723


9,685,000

Diluted weighted average shares outstanding

13,522,150


9,685,000


16,641,815


9,685,000

















Basic net earnings per share

$

0.24

$

0.30

$

0.10

$

0.09

Diluted net earnings per share

$

0.24

$

0.30

$

0.10

$

0.09

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)


2011

2010







Cash Flows From Operating Activities                                                                           





   Net Income

$

3,266,657

$

2,947,635

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




       Depreciation and amortization

477,996


273,056

    Changes in operating assets and liabilities:







       Accounts receivable

(4,903,096)


(3,378,842)

       Accounts receivable - related party

250,573


6,940

       Advance to suppliers

(62,051)


(1,178,648)

       Inventory

325,593


1,474,721

       Other current assets

(68,076)


87,429

       Accounts payable

1,412,664


721,682

       Advance from customers

(25,498)


61,647

       Accrued expenses and other payables

(457,172)


119,352

       Deferred rent payable

9,873


3,607

       Taxes payable

539,340


832,587









Net Cash Provided by Operating Activities

766,803


1,971,166









Cash Flows From Investing Activities







    Deposit on factory construction

(617,906)


--

    Cash received from acquired subsidiary

141,231


--

    Acquisition of Diamond Bar Outdoors, Inc.

(450,000)


--

    Acquisition of intangible assets

(200,000)


--

    Acquisition of heritage and cultural assets

(125,053)


--

    Acquisition of property and equipment

(348,488)


(632,280)

    Construction in progress

--


(2,783,614)









Net Cash Used in Investing Activities

(1,600,216)


(3,415,894)









Cash Flows From Financing Activities







    Advance to related parties

(1,556,901)


(759,814)

    Proceeds from subscription receivable

450,000


--

    Repayment from related parties

1,355,314


830,243

    Proceeds from private placement

3,859,933


--

    Payment for note payable

(80,000)


--

    Contribution by cash

--


500,000

    Dividend paid

--


(712,370)









Net Cash Provided by (Used in) Financing Activities

$

4,028,346

$

(141,941)

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)


2011

2010







Effect of Exchange Rate Changes on Cash and Cash Equivalents

$

(4,869)

$

14,178









Net increase (decrease) in cash and cash equivalents

3,190,064


(1,572,491)









Cash and cash equivalents, beginning of the period

985,004


2,172,266









Cash and cash equivalents, ending of the period

$

4,175,068

$

599,775


















Supplemental Disclosure of Cash Flow Information













    Cash paid during the period for:







       Income tax payments

$

122,746

$

61,210


















Supplemental Disclosure of Non-Cash Financing Activities













    Subscription receivable from sales of common stock

$

2,400,000

$

--

SOURCE Nova LifeStyle, Inc.

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