China Redstone Group, Inc. Announces Results for Third Quarter and First Nine Months of Fiscal Year 2010

CHONGQING, China, April 8 /PRNewswire-FirstCall/ --

• Third quarter fiscal year 2010 revenues increased 479% to $11.4 million; net income increased 467% to $4.2 million with pro-forma EPS of $0.33.
• Revenues for first nine months of fiscal year 2010 increased 136.6% to $26.5 million; net income increased 208% to $10.0 million, with pro-forma EPS of $0.79.
• Fiscal 2010 Guidance: Revenues of $31.7 million and net income of $12.1 million, an increase of 73.2% and 120.0% over FY 2009. FY 2010 EPS of $0.90 anticipated.
• Fiscal 2011 Guidance: Revenues of $36.9 million and net income of $16.4 million with EPS of $1.20.

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 third quarter and first nine months of its fiscal year ending March 31, 2010.

Summary Financials

* Pro-forma EPS is a non-GAAP financial measure and based on 12.6 million shares outstanding. Please see full disclosure below.

Third Quarter Fiscal Year 2010

Revenues - Total revenues for the three months ended December 31, 2009 were $11.4 million compared to $2.0 million for the three months ended December 31, 2008, an increase of 478.9%, which was mainly attributable to improved consumer demand and the May 2009 reopening of the bridge to the Company's Chongqing cemetery site, where service was previously disrupted by construction of the Three Gorges Dam. During the third quarter of fiscal 2010, the Company sold 2,219 cemetery plots at an average cost of $5,500.

"We are pleased to report significant increases in both revenues and net income for the third quarter of fiscal year 2010," stated Mr. Yivou Ran, chairman and chief executive officer of China Redstone. "With access reestablished to our Chongqing cemetery, our optimal geographic position and accelerating demand from consumers for cemetery plots, we are in a position to begin realizing our true earnings potential."

Cost of Sales - For the three months ended December 31, 2009, cost of sales amounted to $5.4 million or 46.8% of total net revenues as compared to $1.0 million or 51.5% of total revenues for the three months ended December 31, 2008.

Gross Profit and Gross Margin - Gross profit for the three months ended December 31, 2009 was $6.1 million or 53.2% of total revenues, as compared to $0.95 million or 48.5% of total revenues for the same period in 2008. The increase in gross profit was attributable to economies of scale achieved by selling a larger number of cemetery plots.

Operating Expenses - Total operating expenses for the third quarter of fiscal year 2009 were $0.6 million, an increase of 230.1% from $0.2 million for the third quarter of fiscal year 2008. For the 2009 third quarter, advertising expenses amounted to $62,000 as compared to $19,000 for the same period in 2008, an increase of 220.4%, while overall operating expenses increased commensurate with increased sales activities.

Net Income - Net income for the quarter ended December 31, 2009 totaled $4.2 million or 36.4% of revenues, compared to $0.7 million, or 37.2% of revenues, for the quarter ended December 31, 2008, an increase of approximately 467%. Pro-forma net income per share for the third quarter of FY 2010 was $0.33 per share, compared to pro-forma net income per share $0.06 per share for the third quarter FY 2009, both based on 12.6 million shares outstanding.

First Nine Months Fiscal Year 2010

Revenues - Total revenues for the nine months ended December 31, 2009 were $26.5 million compared to $11.2 million for the nine months ended December 31, 2008, an increase of approximately 136.6%. During the nine months ended December 31, 2009, the Company sold 5,127 cemetery plots at an average price of $5,162 compared to 2,615 plots at an average price of $3,935 during the comparable year ago period. Revenues for the nine month period of fiscal year 2008 included $0.7 million in revenue for park and nursery garden services. The Company has recorded no revenue from its park and nursery garden business during fiscal year 2010, nor does it expect to for the remainder of the fiscal year, as it has shifted its focus exclusively to the development of its cemetery business.

Cost of Sales - For the nine months ended December 31, 2009, cost of sales amounted to $12.1 million, or approximately 45.8% of total revenues, compared to cost of sales of $6.4 million, or approximately 57.3% of total revenues for the same period in fiscal year 2008.

Gross Profit - Gross profit for the first nine months of fiscal year 2009 was $14.4 million, or 54.2% of total revenues, compared to $4.8 million, or 42.7% of total revenues for the equivalent period in fiscal year 2008, as the Company gained economies of scale through selling a large number of cemetery plots.

Operating Expenses - Total operating expenses for the nine months ended December 31, 2009 were $1.4 million, an increase of 60.9% from total operating expenses of $0.87 million in the nine months ended December 31, 2008, which resulted from higher advertising expenses to attract more customers, and higher general and administrative expenses commensurate with increased sales activities.

Net Income - Net income for the nine months ended December 31, 2009 totaled $10.0 million or 37.9% of revenues, compared to $3.3 million, or 29.1% of revenues, for the same period in fiscal year 2008, an increase of approximately 208.0%. Pro-forma net income per share for the first nine months of FY 2010 and FY 2009 was $0.79 compared to $0.26, respectively, based upon 12.6 million shares outstanding.

"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. "Our cemetery is located in a highly sought after location in close proximity to Chongqing overlooking a lake, with well-regarded "Feng Shui". With over 80% of our land still available for future development, we expect to generate meaningful growth for years to come. After successfully selling out our first development phase, the Chongqing Guiyuan Cemetery I, we are currently developing the second phase which encompasses over 666,000 square meters of land, with plans to sell between 5,000 and 7,000 cemetery plots annually. Demographic trends, including the aging of the Chinese population and the migration of the population to urban areas, 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 People's Republic of China ("China" or "PRC"). By leveraging our rich land resources, premier facilities and regional leadership position, with low infrastructure and operating costs, we plan to optimize our future financial performance through internal growth, improved operating efficiencies and tactical participation in industry consolidation."

Balance Sheet

On December 31, 2009, the Company had approximately $4.6 million in cash and cash equivalents, which does not include the $4.6 million in capital raised on February 23, 2010 through a private placement. The Company had working capital of $9.6 million and a current ratio of 3.3 to 1 on December 31, 2009. In addition, China Redstone generated approximately $3.2 million in cash flow from operations for the nine months ending December 31, 2009.

Fiscal Year 2010 Guidance

For fiscal year ending March 31, 2010, management expects to report revenues of $31.7 million and net income of $12.1 million, an increase of 73.2% and 120.0% from fiscal 2009 respectively. Based on 13.5 million shares outstanding, this would represent $0.90 in earnings per share. As a key component of this guidance, management expects to sell approximately 5,600 cemetery sites with average selling prices ranging from $5,200 to $5,400. The Company plans to make approximately $14.5 million in capital expenditures for the year.

Fiscal Year 2011 Guidance

For fiscal year ending March 31, 2011, management expects to report revenues of $36.9 million and net income of $15.9 million, representing approximately 16.4% revenue growth and 31.4% net income growth over fiscal 2010.  This would represent $1.20 in earnings per share, based on 13.5 million shares outstanding. As a key component of this guidance, management expects to sell approximately 6,500 cemetery sites with average selling prices ranging from $6,200 to $6,400. The Company plans to make approximately $29.0 million in capital expenditures for the year.

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 was 12.6 million common shares, in addition to 880,000 warrants to purchase common shares. 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 them analyze the health of our business.

China Redstone Group, Inc. (f/k/a Artistry Publications, Inc.)

China Redstone Group, Inc. is a cemetery developer and provider of cemetery products and services in Chongqing, China through its contractually controlled affiliate Chongqing Foguang Tourism Development. 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.

- Financial Tables Follow -

SOURCE China Redstone Group, Inc.