China Redstone Group, Inc. Announces Financial Results for Fourth Quarter and Fiscal Year 2010; Increases Fiscal Year 2011 Guidance

CHONGQING, China, July 15 /PRNewswire-FirstCall/ --

• FY 2010 revenues and adjusted net income exceed guidance
• Fourth quarter FY 2010 revenues increased 40.7% to $10.0 million; adjusted net income increased 72.3% to $3.8 million with adjusted EPS of $0.42
• FY 2010 revenue increased 99.5% to $36.5 million; adjusted net income increased 159.1% to $14.2 million, with adjusted EPS of $1.53;
• FY 2010 cash flow from operations was $9.5 million; and
• FY 2011 Guidance: Revenues of $40.0 million and net income of $19.5 million with EPS of $1.45.
• Management to host earnings call July 19 at 10:30 a.m. ET

China Redstone Group, Inc. (OTC Bulletin Board: CGPI) ("China Redstone" or the "Company"), the largest private provider of cemetery products and services in Chongqing, China, today announced financial results for the fourth quarter and fiscal year ending March 31, 2010.

Summary Financials

Fiscal Year 2010 Results

Revenues - Net revenues for the year ended March 31, 2010 were $36.5 million as compared to $18.3 million for the year ended March 31, 2009, an increase of approximately 99.5%. The significant increase in revenues was primarily due to the development of a new cemetery which led to an increase of sales of cemetery plots. The Company sold 6,730 cemetery plots in fiscal 2010, an increase of 66.1% from fiscal 2009. The average sales price in fiscal 2010 was $5,750, an increase of approximately $1,000, or 17.4% from fiscal 2009.

Cost of Sales - For the year ended March 31, 2010, cost of sales amounted to $17.6 million or approximately 48.1% of total net revenues as compared to $9.9 million or approximately 54.3% of total net revenues for the year ended March 31, 2009. The decrease in cost of sales as a percentage of total net revenues was primarily due to economies of scale achieved in developing a greater number of plots along with incorporating cost efficient techniques in the development of the cemetery.  

Gross Profit – GAAP gross profit for the year ended March 31, 2010 was $18.9 million or 51.9% of total net revenues, as compared to $8.4 million or 45.7% of total net revenues for the year ended March 31, 2009. The increase in gross profit was primarily due to a decrease in cemetery development costs per plot and an increase in sales of deluxe tombs which generate approximately 20% higher margins than traditional tombs. During the fiscal year 2010, the Company realized a one-time expense of $1.0 million related to inventory impairment. Adjusting for the non-cash charge, adjusted gross profit for the fiscal year 2010 was $20.5 million with an adjusted gross margin of 56.2%.  

Operating Expenses - Total operating expenses for the year ended March 31, 2010 were $1.8 million, an increase of 21% from the total operating expenses for the year ended March 31, 2009, which resulted from higher advertising expenses to attract more customers, and higher general and administrative expenses commensurate with increased sales activities.

Net Income – GAAP net income for fiscal year 2010 totaled approximately $12.2 million, or $1.33 per diluted share based on weighted average shares outstanding of 9.3 million compared to $5.5 million, or $0.62 per diluted share based on weighted average shares outstanding of 8.8 million. Results for FY2010 included a one-time expense of $1.0 million related to inventory impairment and a $0.57 million non-cash charge related to changes in fair value of warrants. Adjusting for these items, adjusted net income for FY 2010 would have been $14.2 million with corresponding adjusted net income per diluted share of $1.53.

Balance Sheet and Cash Flow

At March 31, 2010, China Redstone had cash and cash equivalents of $9.4 million, an increase of $4.8 million from December 31, 2009, primarily due to the $4.6 million financing completed in February 2010. The Company generated $9.5 million net cash provided by operating activities, an increase of 46% from March 31, 2009. The increase was primarily attributable to the increase in the sales of cemetery plots, offset by costs incurred to build up inventory.

Fiscal Year 2011 Guidance

For fiscal year ending March 31, 2011, management increased revenues and net income guidance to $40.0 million and $19.5 million, respectively; representing approximately 9.6% revenue growth and 37.3% net income growth over fiscal 2010. This would represent $1.45 in earnings per share, based on 13.4 million shares outstanding. As a key component of this guidance, management expects to sell approximately 7000 cemetery sites in fiscal 2011 with average selling prices ranging from $5,000 to $6,250.

"We are pleased to exceed both our revenues and net income guidance for fiscal year 2010," stated Mr. Yivou Ran, Chairman and Chief Executive Officer of China Redstone. "We continue to experience robust growth in our cemetery business, which showed measured gains in revenues, number of plots sold and average sales price. As the largest developer and provider of cemetery products and services in the most populated of China's four provincial level municipalities, China Redstone is well positioned to capitalize on growth in the death care industry," added Mr. Ran. "According to the National Population and Family Planning Commission of the PRC, the current annual death rate of Chongqing is 0.65% and it is predicted to go up to approximately 0.7% in the next three years. In the meantime, the population for the city keeps growing and the pace of urbanization has accelerated. Our cemetery is located in a highly sought after location outside of Chongqing with well-regarded "Feng Shui" overlooking a lake. With over 80% of our land still available for future development, and low infrastructure and operating costs, we expect to generate meaningful growth for years. Demographic trends in addition to higher disposable income and the emphasis placed on proper burials will continue to drive demand in the death care industry, which was cited in 2008 as the third most profitable industry in China by the Ministry of Civil Affairs of the PRC. By leveraging our rich land resources, premier facilities and regional leadership position, we plan to optimize our future performance through internal growth, improved operating efficiencies and tactical participation in industry consolidation."

Conference Call

The conference call will take place at 10:30 a.m. ET on Monday, July 19, 2010. Interested participants should call 1-877-941-4774 when calling within the United States or 1-480-629-9760 when calling internationally (passcode 4330782).

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on this link: http://viavid.net/dce.aspx?sid=00007828, or visiting http://www.viavid.net, where the webcast can be accessed through July 26, 2010.

A playback will be available through May 25, 2010. To listen, please call 1-800-870-5176 within the United States or 1-858-384-5517 when calling internationally (passcode 4330782).

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP EPS as denoted by the term proforma in the press release. The share count after the Company's merger and go public transaction were 12.6 million common shares and approximately 771,239 warrants to purchase common shares at an exercise price of $4.10 per share. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help analyze the health of our business.

China Redstone Group, Inc.

China Redstone is a cemetery developer and provider of cemetery products and services in Chongqing, China, through its contractually controlled affiliate Chongqing Foguang Tourism Development (Group) Co., Ltd. Founded in 2002, the Company provides a complete range of funeral merchandise and services, including cemetery property, both at the time of need and on a preneed basis. Its cemeteries are highly regarded in terms of a number of factors such as tradition, reputation, physical size, capacity of business, available supply, name recognition, aesthetics and potential for development or expansion.   

Safe Harbor Statement

Certain statements set forth in this press release constitute "forward-looking statements." Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will likely," "should," "could," "would," "may" or words or expressions of similar meaning. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the company's actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company's ability to grow its business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company's limited operating history, the limited financial resources, domestic or global economic conditions -- especially those relating to China, activities of competitors and the presence of new or additional competition, and changes in Federal or State laws, restrictions and regulations on doing business in a foreign country, in particular China, and conditions of equity markets. More information about the potential factors that could affect the Company's business and financial results is included in the Company's filings, available via the United States Securities and Exchange Commission.

The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.

SOURCE China Redstone Group, Inc.