Nova LifeStyle, Inc. Reports 2011 Fiscal Year Results - Sales Up 50%, Net Income Up 28%

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Apr 02, 2012, 06:55 ET

COMMERCE, Calif., April 2, 2012 /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 year ended December 31, 2011, as reported on its annual report on Form 10-K filed on March 30, 2012.

2011 HIGHLIGHTS

Net sales of $43.16 million, an increase of 50% year-over-year
Gross profit increased 60% to $12.11 million
Net income of $5.37 million, an increase of 28% year-over-year
Acquired Diamond Sofa (www.diamondsofa.com), an urban contemporary national furniture brand sold to major U.S. furniture companies
2012 Guidance: Anticipate net sales of between $50 million and $58 million and net income of between $7 million and $8 million from organic growth


	Year Ended December 31, 2011		Year Ended December 31, 2010		YoY% Change
Net sales	$	43,162,026	$	28,818,982		50%
Gross profit	$	12,113,074	$	7,576,958		60%
Gross profit margin		28%		26%
Income from operations	$	6,939,676	$	5,266,672		32%
Operating margin		16%		18%
Net income	$	5,365,165	$	4,203,009		28%
Net income margin		12%		15%
Diluted EPS	$	0.37	$	0.43		(14)%

MANAGEMENT COMMENTS

Tawny Lam, President of Nova LifeStyle, commented: "We are pleased with our strong growth and performance in 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 sales and net income growth demonstrate consumers' appetite for our modern contemporary products. We look forward to continuing our path of strong sales and earnings growth in 2012."

NET SALES

Net sales in 2011 were $43.16 million, an increase of 50% from $28.82 million in 2010. The increase in net sales resulted primarily from a 19% increase in sales volume in 2011 and our acquisition of the Diamond Sofa brand in August 2011, which contributed $6.22 million in additional sales for the year. Our largest selling product categories in 2011 were sofas, dining tables and chairs, which accounted for approximately 22%, 17% and 15% of sales, respectively. Sales to international markets increased $12.37 million in 2011 compared to 2010 principally as a result of increased sales in North America. We believe that we can continue to expand our sales in the U.S. and international markets as we integrate the Diamond Sofa brand and increase direct sales as we expand and explore new markets worldwide. Overall sales to China also increased 24% to $10.32 million in 2011 compared to $8.35 million in 2010. Sales from franchisees selling Nova-branded products in China contributed approximately $5.51 million, constituting 53% of total China sales during 2011, compared to $1.69 million or 20% in 2010. We anticipate increasing sales volume in China as our franchise store network continues to expand and we introduce new lines of branded products in 2012.

GROSS PROFIT

Gross profit increased 60% to $12.11 million in 2011. Gross profit margin increased to 28% in 2011 from 26% in the same period last year, primarily as a result of increased sales volume and overall average selling price, 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 we adjust pricing based on rising raw material costs.

OPERATING EXPENSES

Operating expenses, consisting of selling, general and administrative expenses, were $5.17 million in 2011, an increase of 124% compared to 2010, 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 $5.37 million in 2011, an increase of 28% year-over-year. Net profit margin was 12%, a decrease of 3% from the 2010 period due primarily to increased sales and gross profit margin, but offset by increased operating expenses.

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 CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2011 AND 2010
	2011		2010

Assets


Current Assets
Cash and cash equivalents	$	2,505,179	$	985,004
Accounts receivable		18,974,612		5,921,872
Accounts receivable - related party		28,289		565,170
Due from factor		203,351		--
Advance to suppliers		349,767		326,010
Inventory		1,848,081		1,017,704
Prepaid expenses and other receivable		113,853		126,394
Deferred tax asset		156,974		115,237


Total Current Assets		24,180,106		9,057,391


Noncurrent Assets
Heritage and cultural assets		128,687		--
Plant, property and equipment, net		8,721,186		8,192,937
Construction in progress		91,466		75,498
Construction deposit		634,830		--
Goodwill		218,606		--
Intangible assets, net		724,465		471,812
Deferred tax asset		118,144		--


Total Noncurrent Assets		10,637,384		8,740,247


Total Assets	$	34,817,490	$	17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 2011 AND 2010
	2011		2010

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	6,758,058	$	1,160,634
Advance from customers		91,021		25,016
Accrued liabilities and other payables		834,128		1,065,421
Taxes payable		198,984		197,785
Due to related party		--		197,776

Total Current Liabilities		7,882,191		2,646,632

Noncurrent Liabilities
Deferred rent payable		58,949		43,169
Deferred tax liability, net		--		1,274
Income tax payable		4,016,266		2,368,795

Total Noncurrent Liabilities		4,075,215		2,413,238

Total Liabilities		11,957,406		5,059,870

Contingencies and Commitments

Stockholders' Equity

Common stock, $0.001 par value; 75,000,000 shares authorized, 17,898,267 and 9,685,000 shares issued and outstanding as of December 31, 2011 and 2010, respectively		17,898		9,685
Additional paid-in capital		17,074,535		10,902,815
Subscription receivable		(1,950,000)		--
Statutory reserves		6,241		6,241
Accumulated other comprehensive income		2,138,974		1,611,756
Retained earnings		5,572,436		207,271

Total Stockholders' Equity		22,860,084		12,737,768

Total Liabilities and Stockholders' Equity	$	34,817,490	$	17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
	Years Ended December 31,
	2011		2010

Net Sales (Including sales to related parties of $902,638 and $1,491,875 during the years ended December 31, 2011 and 2010, respectively)	$	43,162,026	$	28,818,982

Cost of Sales		31,048,952		21,242,024

Gross Profit		12,113,074		7,576,958

Operating Expenses
Selling expenses		1,865,086		959,673
General and administrative expenses		3,308,312		1,205,881
Loss on disposal of plant, property and equipment		--		144,732

Total Operating Expenses		5,173,398		2,310,286

Income From Operations		6,939,676		5,266,672

Other Income (Expenses)
Non-operating income		52,043		57,844
Foreign exchange transaction loss		(90,609)		(66,419)
Interest income		1,402		2,549
Financial expense		(76,836)		(22,556)

Total Other Expenses, Net		(114,000)		(28,582)

Income Before Income Tax		6,825,676		5,238,090

Income Tax Expense		1,460,511		1,035,081

Net Income		5,365,165		4,203,009

Other Comprehensive Income
Foreign currency translation		527,218		294,871

Comprehensive Income	$	5,892,383	$	4,497,880

Basic weighted average shares outstanding		14,506,915		9,685,000
Diluted weighted average shares outstanding		14,697,206		9,685,000

Basic net earnings per share	$	0.37	$	0.43
Diluted net earnings per share	$	0.37	$	0.43

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
	2011		2010

Cash Flows From Operating Activities
Net Income	$	5,365,165	$	4,203,009
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		663,031		374,123
Loss on fixed assets disposal		--		144,732
Changes in deferred tax		(172,474)		(42,407)
Changes in operating assets and liabilities:
Accounts receivable		(11,784,975)		(2,448,235)
Accounts receivable - related party		536,881		80,336
Advance to suppliers		(13,609)		(156,830)
Inventory		4,383		1,322,444
Note receivable		--		16,763
Other current assets		18,365		45,123
Accounts payable		3,754,075		149,571
Advance from customers		65,266		(96,590)
Accrued expenses and other payables		(412,246)		304,174
Deferred rent payable		13,243		4,049
Taxes payable		1,497,129		995,422

Net Cash (Used in) Provided by Operating Activities		(465,766)		4,895,684

Cash Flows From Investing Activities
Deposit on factory construction		(619,310)		--
Cash received from acquired Diamond Bar Outdoors, Inc.		141,231		--
Acquisition of Diamond Bar Outdoors, Inc.		(450,000)		--
Acquisition of intangible assets		(200,000)		--
Purchase of heritage and cultural assets		(125,541)		--
Purchase of property and equipment		(589,185)		(4,742,229)
Cash paid for construction in progress		(11,840)		--

Net Cash Used in Investing Activities		(1,854,645)		(4,742,229)

Cash Flows From Financing Activities
Advance to related parties		(1,560,085)		--
Repayment from related parties		1,357,289		332,373
Proceeds from subscription receivable		450,000		--
Proceeds from private placement, net		3,859,933		--
Payment for note payable		(80,000)		--
Due from factor		(203,351)		--
Contribution by cash		--		500,000
Dividend paid		--		(2,172,590)

Net Cash Provided by (Used in) Financing Activities	$	3,823,786	$	(1,340,217)

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
	2011		2010

Effect of Exchange Rate Changes on
Cash and Cash Equivalents	$	16,800	$	(500)

Net increase (decrease) in cash and cash equivalents		1,520,175		(1,187,262)

Cash and cash equivalents, beginning of year		985,004		2,172,266

Cash and cash equivalents, end of year	$	2,505,179	$	985,004


Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
Income tax payments	$	126,702	$	78,936


Supplemental Disclosure of Non-Cash Financing Activities

Subscription receivable from sales of common stock	$	2,400,000	$	--
Transfer from construction in progress to fixed assets	$	--	$	527,839