China Linen Textile Industry, Ltd. Reports First Quarter 2011 Results; Revenues Increase 79% to $15.8 Million, Net Income Increases 50% to $3.2 Million with Diluted EPS of $0.46

HARBIN, China, May 23, 2011 /PRNewswire-Asia/ -- China Linen Textile Industry, Ltd. (OTC Bulletin Board: CTXIF) ("China Linen" or the "Company"), one of China's leading linen fabric and linen yarn producers and exporters, today announced financial results for the first quarter ended March 31, 2011.

• Q1 2011 revenues increased 79% to $15.8 million.
• Q1 2011 gross profit increased 109% to $5.7 million, gross margin up 507 basis points to 36.0%
• Q1 2011 net income increased 50% to $3.2 million; diluted EPS of $0.46 vs. $0.36 a year ago.

SUMMARY FINANCIALS

"The first quarter of this year was marked by continued growth in revenues and net income, which benefitted from both volume increases and price improvements. We successfully expanded the sales and distribution channels for our linen fabric and yarn during the past year and utilized new capacity brought on-line through the Lanxi Tianxianfang Linen Co. acquisition. We also began to realize cost saving benefits from the integration of this business," said Mr. Gao Ren, Chairman and CEO of China Linen. "Through the addition of a bleaching factory and our recently upgraded linen yarn dyeing facility, we are becoming a vertically integrated linen producer, which enables to us to capture more of the value chain while meeting increasing demand for our products both in China and abroad. International sales comprised 58% of revenues and were driven by growth in India and Turkey, including new markets such as Spain and Thailand, while higher domestic demand for linen products also drove revenue growth."

Three Months Ended March 31, 2011 Financial Results

Revenue for the three months ended March 31, 2011 totaled $15.8 million, up approximately 79% from $8.8 million for the three months ended March 31, 2010. The increase in revenue was primarily attributable to increased sales volume of both linen yarn and linen fabric, increased sales from the acquisition, increased sales from new products and new customers. Gross profit for the first quarter of 2011 was $5.7 million, up 109% from $2.7 million from the first quarter of 2010 and was driven by sales growth. Gross margin for the three months ended March 31, 2011 was 36.0%, an increase of 507 basis points from 30.9% for the three months ended March 31, 2010, mainly due to sales price increases and our ability to efficiently control production costs.

Operating expenses increased 131% to $1.2 million in the three months ended March 31, 2011 from $0.5 million in 2010, mainly due to an increase in sales expenses, research and development costs, depreciation and amortization in connection with the increase of fixed assets.

Operating income increased 103% to $4.4 million for the first quarter of 2011 from $2.2 million in the same period of 2010, while operating margins increased 332 basis points to 28.1%.

Net income was $3.2 million for the three months ended March 31, 2011 as compared to $2.1 million for the three months ended March 31, 2010, representing an increase of approximately 50%, representing diluted earnings per share of $0.46, compared to $0.36 in the same period of 2010, an increase of 28%.

Balance Sheet and Cash Flow

As of March 31, 2011, the Company had cash and cash equivalents of $1.5 million, compared to $4.2 million at December 31, 2010. Inventory increased from $9.9 million as of December 31, 2010 to $23.0 million as of March 31, 2011, as the Company purchased a significant amount of raw materials to meet future sales orders and to reduce the impact of increasing unit purchase prices in the future. Accounts receivable balance was approximately $11.8 million on March 31, 2011, versus approximately $13.3 million on December 31, 2010. Days sales outstanding (DSO) for the first three months of 2011 were approximately 81 days, compared to 107 days for the same period in 2010 mainly due to increased collection effort. Working capital as of March 31, 2011 totaled $25.5 million. The Company had total stockholders' equity of $35.7 million at March 31, 2011, with total assets of $57.8 million versus total liabilities of $22.1 million, compared to total stockholders' equity of $32.2 million at December 31, 2010, with total assets of $51.6 million versus total liabilities of $19.5 million.

For three months ended March 31, 2011, the Company's cash used in operations were $0.2 million, with the divergence in net income mainly coming from an increase in cash used in inventory.

"As fashion trends across Europe and Asia favor pure linen products and accessories, and consumers increasingly recognize the quality and value of these products, we believe the linen market will continue to expand in 2011. In addition, higher overall cotton prices make linen more affordable on a relative basis and give us another reason to be optimistic about our business prospects going forward," Mr. Ren concluded.

Conference Call

The Company will host a conference call to discuss its first quarter 2011 financial results on May 23rd, 2011 at 4:30 p.m. ET. Interested participants should call +1-877-941-4774 within the United States, or +1-480-629-9760 if calling internationally. The conference ID is 4443284. It is advisable to dial in approximately 5-10 minutes prior to 4:30 p.m. ET.

A playback will be available through May 30, 2011. To listen, please call +1-877-870-5176 within the United States or 1-858-384-5517 when calling internationally. Utilize the pass code 4443284 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed at ViaVid's website at http://www.viavid.net or at the following link: http://viavid.net/dce.aspx?sid=0000871E.

About China Linen Textile Industry, Ltd.

China Linen Textile Industry, Ltd. (http://www.chinalinentextile.com) 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, one bleaching factory and two fabric weaving factories in its 35,120 square meters of building area with a staff of 1,400 and 430 sets of world-class, advanced production machinery. Annual production capacity totals approximately 2,220 tons with 50 different types of yarn and 10 million meters of fabric with 110 types. Approximately 50 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.

SOURCE China Linen Textile Industry, Ltd.