China Forestry Industry Group Reports Fourth Quarter and Fiscal Year 2010 Financial Results
GUIYANG, China, April 25, 2011 /PRNewswire-Asia/ – China Forestry Industry Group, Inc. (OTC Bulletin Board: CNFI) (“China Forestry” or the “Company”), a company involved in the production and sale of floor materials and related products to residential and commercial customers in China through its subsidiaries Aosen Forestry and Silvan Flooring, announced its financial results for the fourth quarter and fiscal year 2010 ended December 31, 2010 on April 15, 2011.
Fourth Quarter 2010 Highlights
- Revenue grew 206.1% year-over-year to $11.3 million
- Gross profit increased 164.8% to $3.1 million, from $1.2 million in the fourth quarter of fiscal year 2009
- Operating income was $2.6 million, an increase of 159.0% compared to $1.0 in the year-ago period
- Net income increased 169.2% to $2.1 million, or $0.08 per diluted share, as compared to approximately $0.8 million, or $0.04 per diluted share a year ago
- The Company completed a reverse acquisition transaction with China Bingwu Forestry Group Limited, a Hong Kong company, as a result of which, the Company changed its name to China Forestry Industry Group, Inc. and is engaged through Bingwu’s subsidiaries, in the business of producing and selling floor materials and related products to residential and commercial customers in China
Full Year 2010 Highlights
- Revenue increased 178.8% to $37.0 million, from $13.3 million in 2009
- Gross profit increased 257.1% to $11.7 million
- Gross margin increased 695 basis points to 31.7%, from 24.8% in 2009
- Operating income increased 288.4% to $10.0 million
- Operating margin increased to 27.1%, from 19.5%
- Net income increased 313.7% to $9.3 million, or $0.42 per diluted share, as compared to $2.2 million or $0.11 per diluted share in 2010.
“We are pleased to report strong growth in revenues, operating margins, and earnings in 2010,” said Mr. Yulu Bai, Chairman and Chief Executive Officer of China Forestry. “This performance was mainly driven by our strategy to expand into flooring products, develop forestry resources and build a large distribution network for floor products in southwestern China. The increase in sales was mainly due to the expansion of our product portfolio from fiber boards to include laminate flooring, following Silvan Flooring’s November 2009 commencement of operations, and the expansion of our distribution network to include 8 retail stores and over 500 contracted flooring specialty stores as of December 31, 2010. As a result of economies of scale from our growing production and sales volume and the inclusion of higher-margin laminate flooring, our gross profit margin and net income increased as well.”
Fourth Quarter Fiscal 2010 Results
For the three months ended December 31, 2010, revenues were $11.3 million, an increase of 206.1%, from $3.7 million for the corresponding period in 2009. The increase was primarily due to the incorporation of the laminate flooring business unit and the expansion of the Company’s sales and distribution network.
Laminate flooring accounted for $10.1 million, or 88.7% of total sales for the fourth quarter 2010, an increase of 461.3%, from $1.8 million, or 48.4% of total sales for the corresponding quarter previous year. The increase was mainly due to the incorporation of Silvan Flooring, the Company’s laminate flooring business, in the middle of the fourth quarter 2009 and an expansion of its retail distribution network from 7 retail stores and 473 specialty stores as of December 31, 2009 to 8 retail stores and 504 specialty stores as of December 31, 2010.
Fiber board accounted for $1.3 million, or 11.3% of total sales for the fourth quarter 2010, compared to $1.9 million, or 51.6% of total sales, for the corresponding quarter prior year. The decrease was mainly due to a higher level of vertical product integration where a large portion of the Company’s own fiber board production was internally sold to the laminate flooring division, and was thus not considered revenue on a consolidated basis.
Cost of sales for the fourth quarter of 2010 was $8.2 million, an increase of 225.4%, from $2.5 million for the fourth quarter of 2009. The increase was primarily due to a corresponding increase in sales. Gross profit was $3.1 million, an increase of 164.8% from the corresponding period in the previous year. Gross margin was 27.6%, compared to 31.9% in the corresponding three month period of the previous year. The decrease in gross margin was primarily due to the Company lowering its selling prices for certain laminate flooring products in order to capture market share.
Selling and marketing expenses for the fourth quarter of 2010 were $105,561, an increase of 331.7%, from $24,450 for the corresponding period previous year. The increase was due to increased transportation and advertisement expenses resulting from the expansion of the Company’s sales network.
General and administrative expenses for the fourth quarter of 2010 were $384,019, an increase of 177.4% from $138,454 for the corresponding period previous year. The increase was primarily attributable to higher management expenses related to expanded operations during the 2010 period.
Operating income was $2.6 million, an increase of 159.0% from $1.0 million previous year. Operating margin was 23.3%, compared to 27.5% for the corresponding period previous year.
The Company recorded $0.7 million in provision for income taxes for the three months ended December 31, 2010, compared to $0.4 million for the corresponding period during the previous year.
As a result, net income was $2.1 million, or $0.08 per diluted share, for the fourth quarter of 2010, compared to $0.8 million, or $0.04 per diluted share, for the corresponding three-month period during the previous year. The Company had 26,843,333 weighted average diluted shares outstanding for the three months ended December 31, 2010, compared with 20,500,000 for the corresponding period in 2009.
Fiscal Year 2010 Results
For the fiscal year ended December 31, 2010, revenues were $37.0 million, an increase of 178.8% from $13.3 million in 2009. The increase in sales was mainly attributable to the incorporation of the laminate flooring business unit and the expansion of the Company’s sales and distribution network. Gross profit was $11.7 million, an increase of 257.1% from gross profit of $3.3 million in 2009. Gross margin was 31.7%, compared to 24.8% in fiscal 2009. Operating expenses for 2010 were $1.7 million, as compared to $0.7 million for the same period a year ago. Income from operations was $10.0 million, an increase of 288.4% from $2.6 million in 2009. Net income for 2010 was $9.3 million, or $0.42 per diluted share, an increase of 313.7% from $2.2 million, or $0.11 per diluted share, previous year.
Financial Condition
As of December 31, 2010, the Company had cash and cash equivalents of $2.3 million, accounts receivable of $5.4 million, and working capital of $14.6 million. The Company has no long term debt. Shareholders’ equity was $32.9 million as of December 31, 2010. For the twelve months ended December 31, 2010, the Company used $1.3 million in cash in operating activities, mainly due to an increase in deposits and prepaid expenses in connection with deposits for raw materials and goods supplies, an increase in accounts receivable and a decrease in accounts payable.
Subsequent Events
In January 2011, the Company retained CCG Investor Relations to design and execute its investor relations campaign.
In January 2011, the Company’s operating subsidiary, QianXiNan Aosen Forestry Co., Ltd., participated in SURFACES 2011 in Las Vegas, Nevada, one of the largest floor covering events.
Business Outlook
The Company expects to continue capitalizing on the growing urban residential housing market in southwestern China. In the upcoming years, the Company plans to continue expanding the sale of its goods through its affiliated retail stores and its sales and distribution networks, enhance brand awareness through strategic marketing campaigns, increase its fiber board and laminate flooring production capacity, cultivate timberland resources to provide sufficient raw material, and acquire forestry assets and leading regional flooring companies in key regions.
Mr. Bai concluded: “We are optimistic about our business and believe that we are well positioned to benefit from the rising demand for flooring and fiberboard in China. We believe that our vertically integrated business model will help us to become a leading player in the flooring industry in southwestern China. We also expect that the availability of raw materials from our own forestry lands by 2012 will enable us to keep our raw material costs stable and support our gross margin going forward. ”
About China Forestry Industry Group, Inc.
China Forestry Industry Group, Inc., through its operating subsidiaries, Aosen Forestry and Silvan Flooring, is involved in the production and sale of floor materials and related products to residential and commercial customers in China. The Company’s product lines include laminate flooring and fiber floor boards which are manufactured in a variety of colors, dimensions and designs. The Company’s manufacturing facility in Qianxinan, Guizhou Province has an annual production capacity of 6 million square meters of laminate flooring and 75,000 cubic meters of industrial fiber boards. The Company is headquartered in Guiyang, Guizhou Province.
Safe Harbor Statement
This release may contain certain “forward-looking statements“ relating to the business of China Forestry Industry Group, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein are “forward-looking statements,“ including statements regarding: the ability of the Company to achieve its commercial objectives, including its ability to continue capitalizing on residential housing market in southwestern China, continue expanding the sale of its goods through current networks, enhance brand awareness through strategic marketing campaigns, increase production capacity, obtain sufficient raw material from its own forestry lands by 2012 and keep raw material costs stable, and acquire forestry assets in key regions; the business strategy, plans, and objectives of the Company and its subsidiaries, including its plan to become a leading player in the flooring industry in southwestern China; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,“ “expects“ or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company‘s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company‘s periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov.
All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume any duty to update these forward-looking statements.
Company Contact: Investor Relations Contact:
Terry Li, VP of Investor Relations CCG Investor Relations
Tel: +86-851-552-0951 Crocker Coulson, President
Email: ir@aosenmy.com Tel: +1-646-213-1915
Web Site:
http://www.chinaforestrygroup.com Email: crocker.coulson@ccgir.com
Linda Salo, Senior Financial Writer
Tel: +1-646-922-0894
Email: linda.salo@ccgir.com
Web Site: http://www.ccgir.com
Financial Tables to Follow:
CHINA FORESTRY INDUSTRY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2010 AND DECEMBER
31, 2009
Three months ended December 31
2010 2009
(Unaudited) (Unaudited)
Revenues $11,345,614 $3,707,025
Cost of goods sold $(8,210,911) $(2,523,003)
Gross profit $3,134,703 $1,184,022
Selling and marketing
expenses $(105,561) $(24,450)
General and
administrative
expenses $(384,019) $(138,454)
Net income from
operations $2,645,123 $1,021,118
Other income
(expenses)
Other income $59,423 $8,873
Government grant $160,616 $169,546
Interest expense $(57,647) $(26,767)
Total other income
(expenses) $162,392 $151,652
Income before
provision for income
taxes $2,807,515 $1,172,770
Provision for income
taxes $668,041 $378,095
Net income $2,139,474 $794,675
Other comprehensive
income
Foreign currency
translation gain $445,159 $216
Comprehensive income $2,584,633 $794,891
Dividend stock $- $1,786,190
Earnings per share:
Basic 0.08 0.04
Diluted 0.08 0.04
Weighted average
numbers of
outstanding shares:
Basic 26,843,333 20,500,000
Diluted 26,843,333 20,500,000
Twelve months ended December
31
2010 2009
Revenues $37,042,160 $13,285,949
Cost of goods sold (25,296,696) (9,996,622)
----------- ----------
Gross profit 11,745,464 3,289,327
Selling and marketing
expenses (252,042) (90,273)
General and
administrative
expenses (1,446,629) (612,054)
Net income from
operations 10,046,793 2,587,000
---------- ---------
Other income
(expenses)
Other income 103,411 30,440
Government grant 2,110,792 169,546
Interest expense (289,408) (162,860)
-------- --------
Total other income
(expenses) 1,924,795 37,126
Income before
provision for income
taxes 11,971,588 2,624,126
Provision for income
taxes 2,680,096 378,095
--------- -------
Net income 9,291,492 2,246,031
Other comprehensive
income
Foreign currency
translation gain 1,027,837 1,417
--------- -----
Comprehensive income $10,319,329 $2,247,448
=========== ==========
Dividend stock $- $1,786,190
=== ==========
Earnings per share:
Basic $0.42 $0.11
===== =====
Diluted $0.42 $0.11
===== =====
Weighted average
numbers of
outstanding shares:
Basic 22,083,333 20,500,000
========== ==========
Diluted 22,083,333 20,500,000
========== ==========
CHINA FORESTRY INDUSTRY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010 AND DECEMBER 31, 2009
2010 2009
ASSETS
Current assets
Cash and cash equivalents $2,334,910 $1,471,729
Accounts receivable, net of allowance for
doubtful accounts 5,423,123 2,017,244
Inventory 6,949,679 10,790,285
Deposits and prepaid expenses 12,390,756 6,297,623
Other receivables 777,236 689,898
Taxes recoverable 2,452,407 192,304
Total current assets 30,328,111 21,459,083
---------- ----------
Property and equipment
Property and equipment, net of accumulated
depreciation 6,352,289 6,167,734
Land use rights, net of accumulated
amortization 6,666,591 795,829
Construction in progress 5,304,348 5,116,167
Total property and equipment 18,323,228 12,079,730
---------- ----------
Total assets $48,651,339 $33,538,813
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $3,388,806 $9,497,858
Other payables and accrued expenses 2,567,191 3,698,397
Taxes payable 3,290,481 386,121
Customer deposits 1,936,733 841,308
Short term debts 4,535,830 718,830
$15,719,041 $15,142,514
----------- -----------
Long term liabilities
Long term debts - 733,500
--- -------
Total liabilities 15,719,041 15,876,014
---------- ----------
Commitments and contingencies - -
--- ---
Stockholders' equity
Preferred stock: 5,000,000 shares
authorized of $0.001 par value $- $-
none issued and outstanding
Common stock: 100,000,000 shares
authorized of $0.001 par value 30,000 20,500
30,000,000 and 20,500,000 shares issued
and outstanding as of
December 31, 2010 and December 31, 2009,
respectively
Additional paid in capital 17,988,805 13,048,135
Retained earnings 12,622,369 3,330,877
Accumulated other comprehensive income 2,291,124 1,263,287
Total stockholders' equity 32,932,298 17,662,799
---------- ----------
Total liabilities and stockholders' equity $48,651,339 $33,538,813
=========== ===========
CHINA FORESTRY INDUSTRY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND DECEMBER 31, 2009
2010 2009
Cash flows from operating activities
Net income for the year $9,291,492 $2,246,031
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 284,335 242,320
Amortization 218,802 13,408
Stock based compensation 150,170 -
Changes in operating assets and
liabilities:
Decrease (increase) in inventory 3,840,606 (4,528,854)
(Increase) decrease in deposits and
prepaid expenses (6,093,133) 7,481,938
Increase in accounts receivable (3,405,879) (1,508,786)
(Increase) decrease in other receivables (87,338) 12,775,289
Increase in taxes recoverable (2,260,103) (90,236)
Increase in taxes payable 2,904,360 376,545
(Decrease) increase in accounts payable (6,109,052) 3,017,540
Increase (decrease) in customer deposits 1,095,425 (16,655,142)
Decrease in other payables and accrued
expenses (1,131,206) (1,158,121)
---------- ----------
Net cash (used in) provided by operating
activities (1,301,521) 2,211,932
---------- ---------
Cash flows from investing activities
Purchase of property and equipment (265,901) (1,367,491)
Purchase of land use rights (5,892,000) -
Payment of construction in progress (13,805) (1,860,826)
-------
Net cash used in investing activities (6,171,706) (3,228,317)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock - 4,250,970
Proceeds from issuance of convertible
notes 4,800,000 -
Capital contribution from stockholders - 29,340
Redemption of non-controlling interest - (1,320,300)
Repayment of short term and long term
debt (743,330) (1,467,000)
Proceeds from short term and long term
debt 3,777,330 733,500
Net cash provided by financing activities 7,834,000 2,226,510
--------- ---------
Effects on exchange rate changes on cash 502,408 1,574
------- -----
Increase in cash and cash equivalents 863,181 1,211,699
Cash and cash equivalents, beginning of
year 1,471,729 260,030
--------- -------
Cash and cash equivalents, end of year $2,334,910 $1,471,729
========== ==========
Supplementary disclosures of cash flow
information:
Cash paid for interest $289,408 $162,860
======== ========
Cash paid for income taxes $2,058,251 $378,095
========== ========
Non-cash transactions:
Distribution of stock dividend $- $1,786,190
=== ==========
Issue of common stock from additional
paid in capital $- $3,791,740
=== ==========
Common stock issued for payment of notes
payable $400,000 $-
======== ===
Common stock issued for stock offering
costs $331,000 $-
======== ===
SOURCE China Forestry Industry Group, Inc