BEIJING, November 9, 2009 -- China Fire & Security Group, Inc. (Nasdaq: CFSG) ("China Fire" or "the Company"), a leading total solution provider of industrial fire protection systems in China, today announced its financial results for the third quarter ended September 30, 2009.

 

 

For the third quarter of 2009, revenue increased 48.2% to a record high of $24.8 million compared to $16.7 million for the same period in 2008, benefiting from higher sales of system contracting projects and product sales during the period.  The Company recognized revenues from 205 total solution, product sales and maintenance contracts for the three months ended September 30, 2009 as compared to 163 contracts for the three months ended September 30, 2008.

 

Gross profit for the third quarter of 2009 increased by 41.9%, or $4.1 million, to $14.0 million, from $9.9 million in the same period of prior year. Gross margin for the third quarter of 2009 was 56.4%, compared to 58.9% for the same period of 2008, primarily due to the decreased gross margin of the product sales.

 

Operating income grew 34.4% to $8.5 million, from $6.1 million for the same period last year, driven by the strong revenue growth.  Operating margin in the third quarter of 2009 was 34.4% versus 36.6% a year ago due to the lower gross margin during this period.

 

Operating expenses were $5.5 million for the third quarter of 2009, compared to $3.7 million for the same period of 2008.  As a percentage of the total revenue, operating expense was 22.1%, decreased from 22.3% a year ago.

 

Tax expense was $1.3 million for an effective tax rate of 15.0%, as compared to $6,736 tax credit a year ago.

 

Net income was $7.6 million, an increase of $1.1 million, or 17.0%, as compared to $6.5 million for the same period of 2008.  As a result, fully diluted EPS increased 16.5% to $0.27 in the third quarter of 2009, versus $0.23 in the third quarter of the prior year.

 

Mr. Brian Lin, Chief Executive Office of China Fire commented, “I am satisfied with our third quarter performance, as we achieved record revenue and solid profits.  During the quarter, we have secured contracts from iron and steel companies, power plants, and petrochemical plants. We have also succeeded in significantly growing our international markets with notable wins in the fast-emerging power generation market in India.  While our backlog at the end of the third quarter was $75 million, we continue to be excited by our growth opportunities and by our ability to command firm pricing for our total solutions.  We believe that our technical strengths and leading market position will enable us to seize more growth opportunities from the world’s two most dynamic economies-China and India.”

 

 

 

As of September 30, 2009, the Company had cash of $28.5 million, working capital of $84.1 million, and zero debt.   During the third quarter, our accounts receivable increased by $4.1 million to $28.3 million, our DSOs increased slightly to 130 days, versus 128 days in the previous quarter. 

 

 

 

For the full year 2009, the Company has reaffirmed its revenue guidance of $88 million to $95 million and its projected net income between $28.3 million and $29.7 million, or $1.00 to $1.05 per diluted share.

 

Mr. Lin commented, “As a component of China’s revitalization scheme for the iron and steel industry, the government, in its efforts to control overcapacity, recently held back on further building new production capacity. However, at the same time, the revitalization scheme also encourages our tier-1 iron and steel customers to invest in technology innovation and upgrade, and to build new plants for high-end products.  We are increasingly excited about the large contract opportunities in the market of retrofitting existing iron and steel production capacities, with the further enforcement of new Fire Protection Law and the mandatory national fire codes for iron & steel plants in China. Additionally, we anticipate continued government support to substantially expand the nation’s power generation and transmission capacity and sustained momentum in the transportation and petrochemical verticals.  We are also excited about the fast-growing industrialization process in India and other developing economies throughout Asia.  As such, we remain focused on executing the strategies that we have consistently outlined throughout 2009.

 

“We remain bullish about our growth prospects, and we are confident about our strategy and our technical expertise in fire safety.  We intend to continue growing our leading brand, distribution, customer base, total solution offering, and competitive advantages in the rapidly growing industrial fire protection industry.”

 

 

The Company will hold a conference call to discuss the financial results at 8:00 a.m. ET today, November 9, 2009.  The Company invites you to join the call by dialing 1-719-325-2322.  To listen to the live webcast of the event, please go to http://www.chinafiresecurity.com and click on the Investor Relations section where conference calls are posted. Please go to the website 15 minutes early to download and install any necessary audio software.

 

A replay of the call will be available from November 9, 2009 to November 16, 2009.  Listeners may access the replay by dialing 1-719-457-0820, passcode: 5435341.

 

 

 

China Fire & Security Group, Inc. (NASDAQ: CFSG), through its wholly owned subsidiary, Sureland Industrial Fire Safety Limited ("Sureland"), is a leading total solution provider of industrial fire protection systems in China. Leveraging on its proprietary technologies, China Fire is engaged primarily in the design, manufacture, sales and maintenance services of a broad product portfolio including detectors, controllers, and fire extinguishers. Via its nationwide direct sales force, China Fire has built a solid client base including major companies in iron and steel, power, petrochemical and transportation industries throughout China. China Fire has a seasoned management team with strong focus on standards and technologies. Currently, China Fire has a comprehensive portfolio of patents covering fire detection, system control and fire extinguishing technologies. Founded in 1995, China Fire is headquartered in Beijing with about 600 employees in more than 30 sales and project offices throughout China. For more information about the Company, please go to http://www.chinafiresecurity.com .

 

 

This presentation may contain forward-looking information about China Fire & Security Group, Inc. and its wholly owned subsidiary Sureland which are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, statements about industry trends and China Fire & Security Groups' future performance, operations and products. This and other "Risk Factors" are contained in China Fire & Security Groups' public filings with the SEC.

 

 

 

     China Fire & Security Group, Inc.

     Shayla Suen, Investor Relations

     Tel:   +86-10-8441-7400

     Email: ir@chinafiresecurity.com

 

     ICR, Inc.

     In China:

     Michael Tieu or Bill Zima

     Tel:   +86-10-6599-7960 or +86-10-6599-7969

     Email: michael.tieu@icrinc.com or william.zima@icrinc.com

 

     In the U.S.:

     Brian M. Prenoveau, CFA

     Tel:   +1-203-682-8200

     Email: brian.prenoveau@icrinc.com

 

 

 

 

 

 

	CHINA FIRE & SECURITY GROUP, INC. AND SUBSIDIARIES
	CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
	(Unaudited)
			Three Months Ended September 30,				Nine Months Ended September 30,
			2009		2008		2009		2008
REVENUES
	System contracting projects	$	18,710,099	$	15,173,858	$	50,004,213	$	41,060,246
	Products		5,351,659		978,806		12,267,472		5,393,942
	Maintenance services		754,671		590,603		1,988,823		1,639,429
	Total revenues		24,816,429		16,743,267		64,260,508		48,093,617
COST OF REVENUES
	System contracting projects		7,821,254		6,459,973		19,598,795		18,001,928
	Products		2,559,838		117,258		4,636,886		1,176,638
	Maintenance services		436,026		301,605		1,228,186		821,932
	Total cost of revenues		10,817,118		6,878,836		25,463,867		20,000,498
GROSS PROFIT			13,999,311		9,864,431		38,796,641		28,093,119
OPERATING EXPENSE
	Selling and marketing		2,470,092		1,718,929		6,610,283		5,054,642
	General and administrative		2,416,007		1,132,492		6,080,089		3,559,940
	Depreciation and amortization expenses		197,042		123,829		573,892		445,779
	Research and development		390,029		762,382		1,224,046		1,656,983
	Total operating expense		5,473,170		3,737,632		14,488,310		10,717,344
INCOME FROM OPERATIONS			8,526,141		6,126,799		24,308,331		17,375,775
OTHER INCOME (EXPENSE)
	Other income		241,521		280,094		463,820		501,737
	Other expense		(5,604)		(3,675)		(6,906)		(89,063)
	Interest income, net		99,205		48,010		228,507		139,754
	Total other income		335,122		324,429		685,421		552,428
INCOME BEFORE PROVISION FOR INCOME TAXES
	AND NONCONTROLLING INTEREST		8,861,263		6,451,228		24,993,752		17,928,203
PROVISION FOR INCOME TAXES			1,329,732		(6,736)		3,480,396		53,359
NET INCOME BEFORE NONCONTROLLING INTEREST			7,531,531		6,457,964		21,513,356		17,874,844
Less: Net loss attributable to noncontrolling interest			(22,410)		-		(22,410)		-
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST			7,553,941		6,457,964		21,535,766		17,874,844
OTHER COMPREHENSIVE INCOME (LOSS)
	Foreign currency translation adjustment		121,290		173,873		12,367		3,534,472
COMPREHENSIVE INCOME		$	7,675,231	$	6,631,837	$	21,548,133	$	21,409,316
BASIC EARNINGS PER SHARE
	Weighted average number of shares		27,593,275		27,572,112		27,589,489		27,562,087
	Earnings per share	$	0.27	$	0.23	$	0.78	$	0.65
DILUTED EARNINGS PER SHARE
	Weighted average number of shares		28,372,332		28,259,171		28,299,552		28,205,583
	Earnings per share	$	0.27	$	0.23	$	0.76	$	0.63