BEIJING, Nov. 9, 2010 (GLOBE NEWSWIRE) -- China Fire & Security Group, Inc. (Nasdaq:CFSG) ("China Fire" or "the Company"), a leading industrial fire protection product and solution provider in China, today announced its financial results for the third quarter ended September 30, 2010.
Mr. Brian Lin, chief executive officer of China Fire, commented, "In recent months, the iron & steel industry witnessed lower steel prices and, at the same time, a significant increase in production costs. As such, our core customers – China's mid-to-large iron & steel manufacturers – have experienced a squeeze in profits and cash flows. In light of this, we have also adopted cautious measures to preserve our cash by slowing some of our ongoing projects in order to control expenditures."
Third quarter 2010 Results
For the third quarter of 2010, the Company's total revenues were relatively unchanged at $24.8 million, as compared to the same period in 2009. During this quarter, the Company recognized revenues from 223 total solution, product sales and maintenance contracts as compared to 205 contracts for the same period of 2009. Revenues from system contracting projects increased by 6.2% to $19.9 million derived from 122 contracts during the third quarter of 2010, compared to $18.7 million derived from 101 contracts for the same period of last year. Revenues from product sales were $4.1 million with 47 contracts executed during the third quarter of 2010, compared to $5.4 million with 45 contracts executed for the same period of 2009. Revenues from maintenance service increased by 12.7% to $0.9 million derived from 54 contracts for the third quarter of 2010, compared to $0.8 million derived from 59 contracts for the third quarter of 2009.
Gross margin for the third quarter of 2010 was 50.5%, compared to a gross margin of 56.4% for the third quarter of 2009. The decrease in the Company's gross margin was mainly due to a change in the contract mix during the period.
The Company's operating income for the third quarter of 2010 was $6.8 million, compared to $8.5 million for the same period last year. The decrease in the operating income was mainly attributable to a combination of lower gross profits and higher operating expenses. Correspondingly, GAAP net income for the third quarter of 2010 was $5.9 million, compared to $7.6 million for the same period of 2009, representing an annual decrease of 21.4%. As a result, the Company's fully diluted EPS was $0.20 in the third quarter of 2010, versus $0.27 in the third quarter of 2009.
Liquidity and Capital Resources
As of September 30, 2010, the Company had cash and cash equivalents of $29.6 million, a sequential increase of $1.8 million from $27.8 million at the end of the second quarter of 2010. During the third quarter, the Company generated $2.6 million cash from operations as compared to cash used by operating activities of $4.6 million in the same period of last year.
Mr Lin continues, "Despite the solid fundamentals underlying our fire protection industry and some modest signs of improvement in the iron and steel industry, a recovery has been much slower than we had expected. For the immediate future, we believe our core customers will continue to reactively preserve cash and defer spending, and as such, we view it prudent that we withdraw our business outlook at this time. Having said that, while we await the eventual recovery in the iron & steel vertical, we are committed to expand our competitive advantages and sustain our position as the leading total solution provider of industrial fire protection systems in China."
Conference Call
The Company will hold a conference call to discuss the financial results at 8:00 a.m. ET today, November 9, 2010. The Company invites the participants to join the call by dialing +1-719-457-2606. To listen to the live webcast of the event, please go to http:// and click on the Investor Relations section or visit . 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, 2010 to November 16, 2010. Listeners may access the replay by dialing #1-858-384-5517, passcode: 4950064.
About China Fire & Security Group, Inc.
China Fire & Security Group, Inc. (Nasdaq:CFSG), through its wholly owned subsidiary, Sureland Industrial Fire Safety Limited, 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, manufacturing, sales and maintenance services of a broad product portfolio including detectors, controllers, and fire extinguishers. The Company owns a comprehensive portfolio of patents covering fire detection, system control and fire extinguishing technologies, and via its nationwide direct sales force, has built a solid client base including major companies in iron and steel, power, petrochemical and transportation industries throughout China. Founded in 1995, China Fire is headquartered in Beijing with about 430 employees in more than 30 sales and project offices throughout China. For more information about the Company, please go to .
Cautionary Statement Regarding Forward Looking Information
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.
CONTACT: China Fire & Security Group, Inc. Amy Gao, Investor Relations +86-10-8441-7400 ir@chinafiresecurity.com ICR, Inc. In China: Michael Tieu +86-10-6583-7509 michael.tieu@icrinc.com In the U.S.: Bill Zima +1-203-682-8200 bill.zima@icrinc.com