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8-K - Artistry Publications Inc | v211629_8k.htm |
Exhibit
99.1
China
Redstone Group Reports Third Quarter Fiscal Year 2011 Financial
Results
CHONGQING,
China, Feb 15, 2011 -- China Redstone Group (OTC Bulletin Board: CGPI)
("Redstone" or the "Company"), the largest private provider of cemetery products
and services in Chongqing, China, today announced financial results of the third
quarter ended December 31, 2010.
|
·
|
Q3 FY11 revenue increased 6.0%
to $12.1 million, driven by both unit growth and pricing
increases
|
|
·
|
Q3 FY11 Non-GAAP adjusted net
income increased 27.8% to $5.3 million with adjusted EPS of
$0.42
|
|
·
|
Gross margin increased 1,000
basis points to 63.2%
|
|
·
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China Redstone reaffirms
guidance for FY2011: Revenue of $40.0 million and net income of $19.5
million with EPS of $1.45
|
|
·
|
Management to host earnings
conference call on February 16, 2010 at 10:00am
ET
|
SUMMARY
FINANCIALS
Fiscal
Third Quarter 2011 Results (unaudited)
|
|||
Q3
2011
|
Q3
2010
|
CHANGE
|
|
Net
Sales
|
$12.1
million
|
$11.4
million
|
+6.0%
|
Gross
Profit
|
$7.6
million
|
$6.1
million
|
+26.0%
|
GAAP
Net Income
Adjusted
Non-GAAP Net Income
|
$5.0
million
$ 5.3 million(1)
|
$4.2
million
$4.2
million
|
+19.8%
+27.8%
|
GAAP
EPS (Diluted)
Adjusted
Non-GAAP EPS (Diluted)
|
$0.39
$0.42(1)
|
$0.47
$0.47
|
-16.8%
-11.3%
|
Weighted
Average Shares
|
12.7
million
|
8.8
million
|
+44.0%
|
(1)
|
Excludes $0.3 million non-cash
loss on change in fair value of warrants for Q3 2011. For more
information about the non-GAAP financial measures contained in this press
release, please see "About Non-GAAP Financial Measures"
below.
|
Third
Quarter FY 2011 Financial Results
Revenue
for the third quarter of fiscal year 2011 increased 6.0% to approximately $12.1
million compared to $11.4 million for the third quarter of fiscal 2010.
All revenue in the quarter was generated by selling cemetery plot sales.
The increase in revenues was mainly attributable to the development of a new
cemetery, which led to an increase of sales of cemetery plots and cemetery plot
price. The new cemetery is being built on approximately 11 acres of
land and will have approximately 7,000 plots. The new cemetery plots
were located on more desirable property which was higher up on the hill and had
better views of the lake.
For the
third fiscal quarter of fiscal 2011, which ended December 31, the Company sold
1,682 plots, representing a 24.2% decrease from the third quarter ended December
31, 2010. The Company experienced a surge in plot sales in December 2009 due to
pent up demand after the main road leading to the Company’s cemetery properties
reopened after being closed temporarily for construction. Excluding
December, China Redstone sold 0.3% less plots in fiscal Q3 2011 compared to the
same period last year. The average sales price per plot for the third quarter of
fiscal 2011 increased by approximately 39.3% from the same period last year to
$7,249 per cemetery plot. The increase was also attributable to focused
marketing investments on television advertisements in targeted areas, increased
incentives for its sales agents and the new cemetery plots located on a
more desirable property, which were higher up on the hill and had better views
of the lake. The new cemetery plots are being sold for approximately 17% more
than the old cemetery plots.
Fiscal
year ending March 31
|
Q3 2010 | Q2 2011 | Q3 2011 |
FY
2011 YTD
|
FY
2011 Guidance
|
|||||||||||||||
Cemetery
Plot Sales
|
2,219 | 1,726 | 1,682 | 5,262 | 7,000 | |||||||||||||||
Average
Sales Per Plot
|
$ | 5,203 | $ | 6,800 | $ | 7,249 | $ | 6,958 | $ | 5,000 - $6,250 |
"We are
pleased with our positive operating results, which are the result of timely
execution of our growth plan," stated Mr. Yivou Ran, Chairman and Chief
Executive Officer of China Redstone. "We continue to experience robust growth in
our cemetery business, which showed measured gains in revenues, number of plots
sold and average sales price. As one of the few private cemetery companies in
Chongqing with a large inventory of desirable plots, we are uniquely positioned
to benefit from the secular growth in this industry."
Gross
profits for the third quarter of fiscal 2011 were $7.6 million with gross
margins of 63.2%, compared to $6.1 million in gross profit and gross margins of
53.2% for the third quarter of fiscal 2010. The increase in gross profit was
attributable to a decrease in the cost of goods sold as a percentage of sales as
the Company was able to develop cemetery plots for a cheaper price due to the
advantage of economies of scale. Additionally, the Company was also able to sell
higher margin products since it was able to utilize its historical sales records
to develop and sell higher margin cemetery plots with the sale of a deluxe tomb
able to generate a 20% higher margin as compared to the basic
tombs.
Operating
expenses for the third quarter of fiscal 2011 were approximately $0.7 million,
an increase of 3.9% compared to the same period in 2010, which resulted from
higher advertising expenses to attract more customers, and higher general and
administrative expenses commensurate with increased sales activities, in
addition to public company expenses.
Operating
income for the third quarter of fiscal 2011 totaled approximately $7.0 million,
a 28.6% increase from $5.4 million reported for the third quarter of fiscal
2010. Operating margins increased 1,000 basis points for the third quarter of
fiscal 2011 over the same period of the prior year. The increase in income from
operations was attributable to the increase in the sale of cemetery
plots and the ability to increase the average price of cemetery plot as the
Company expanded into new developments, which had a more desirable
location.
GAAP net
income was approximately $5.0 million for the third quarter of fiscal 2011, a
19.8% increase from the third quarter of fiscal 2010. Diluted earnings per share
were $0.39 for the third quarter of fiscal 2011 compared to $0.47 for the third
quarter of fiscal 2010, based upon 12.7 million and 8.8 million diluted common
shares outstanding, respectively. Adjusted Non-GAAP net income excluding a $0.3
million loss on change in fair value of warrants in the third quarter was $5.3
million, or $0.42 per diluted common share based on 12.7 million diluted common
shares outstanding for the third quarter of fiscal 2011.
FY
2011 Nine Months Financials Results
Fiscal
Year-to-date 2011 Results (unaudited)
|
|||
YTD
2011
|
YTD
2010
|
CHANGE
|
|
Net
Sales
|
$35.8
million
|
$26.5
million
|
+35.1%
|
Gross
Profit
|
$22.1
million
|
$14.4
million
|
+53.6%
|
GAAP
Net Income
Adjusted
Non-GAAP Net Income
|
$14.5
million
$ 14.3 million(1)
|
$10.0
million
$10.0
million
|
+44.4%
+41.9%
|
GAAP
EPS (Diluted)
Adjusted
Non-GAAP EPS (Diluted)
|
$1.14
$1.12(1)
|
$1.14
$1.12
|
-0.4%
-2.1%
|
Weighted
Average Shares
|
12.8
million
|
8.8
million
|
+45.0%
|
(1)
|
Excludes $0.3 million non-cash
gain from change in fair value of warrants YTD 2011. For more information about the
non-GAAP financial measures contained in this press release, please see
"About Non-GAAP Financial Measures"
below.
|
For the
first nine months of fiscal 2011, revenue increased 35.1% to $35.8 million from
$26.5 million in the same period of the prior year. Year-to-date, the
Company sold 5,262 plots, representing a 2.6% increase from the first nine
months ended fiscal 2010. Average sales price per plot for the first nine months
of fiscal 2011 increased 30.0% to $6,704. Cost of goods sold increased 13.2% to
$13.7 million yielding gross profits of $22.0 million and gross margin of 61.7%
for the first nine months of fiscal 2011.
Operating
expenses increased 132.0% to $3.2 million due to improved sales levels, costs
for being a public company, and increased salaries and wages. Income from
operations increased 45.2% to $18.8 million with operating margins of 52.6%.
GAAP net income for the first nine months of fiscal 2011 was $14.5 million and
diluted earnings per share was $1.14 compared to net income of $10.0 million and
diluted earnings per share of 1.14 in the same period of fiscal 2010, based on
12.8 million shares and 8.8 million shares, respectively. Adjusting for the $0.3
million non-cash gain for the change in fair value of warrants, net income was
$14.3 million for the first nine months of fiscal 2011, yielding $1.16 in
diluted earnings per share, respectively.
Balance
Sheet and Cash Flow
Cash and
cash equivalents totaled $8.7 million on December 31, 2010, compared to $9.4
million on March 31, 2010. Inventory was approximately $8.9 million on December
31, 2010, versus approximately $11.2 million on March 31, 2010. The Company had
a current ratio of 11 to 1 and stockholders' equity of $53.3 million, with total
assets of $66.9 million versus total liabilities of $13.7 million on December
31, 2010.
For the
first nine months of fiscal 2011, net cash provided by operating activities was
$20.5 million versus $8.1 million for the same period in 2010. The increase was
primarily attributable to cash paid for construction in progress – cemetery
inventory developed for sale for the nine months ended December 31, 2010 is more
than the cash paid for inventory developed for sales for nine months ended
December 31, 2009.
Business
Updates
China
Redstone began developing approximately 7,000 cemetery plots on approximately 11
acres of land located in the leased area of its property in the second quarter
of fiscal 2011. By starting construction on all 7,000 cemetery plots in advance
instead of in batches of 500 plots, the Company was able to reduce the
construction costs by approximately 5%. The total estimated capital expenditures
for the 7,000 plots are approximately $19.6 million, of which $18.2 million has
already been paid through December 31, 2010. Management expects to complete this
project, including construction of the walls, roads and other infrastructure, by
calendar second quarter of 2011.
The
Company started construction of the Guanying Temple, located in the leased land
in November 2010. This temple will serve as a spiritual center where current and
prospective clients can visit. In addition, it will house over 10,000 urns,
which will be sold to customers at an average price of approximately $750 each.
Management anticipates the completing construction by the end of fiscal 2011,
with a grand opening scheduled for September 2011. The total construction cost
will be approximately $3.6 million, $1.5 million of which has been paid as of
December 31, 2010.
Fiscal
2011 Guidance
Based on
the strong results recorded in the first nine months of fiscal 2011, Management
reaffirms guidance of sales of $40 million and net income of $19.5 million with
EPS of $1.45 for the fiscal year ending March 31, 2011. Guidance assumes 7,000
plots sold at an average sales price of $5,000 to $6,250.
Conference
Call
The
conference call will take place at 10:00 a.m. ET on Wednesday, February 16,
2011. Interested participants should call 1-877-941-1427 when calling within the
United States or 1-480-629-9664 when calling internationally (passcode:
4413375).
This
conference call will be broadcast live over the Internet and can be accessed by
all interested parties by clicking on this link: http://viavid.net/dce.aspx?sid=000081B5
or visiting http://www.viavid.net
where the webcast can be accessed through February 23, 2011.
A
playback will be available through February 23, 2011. To listen, please call
1-877-870-5176 within the United States or 1-858-384-5517 when calling
internationally (passcode: 4413375).
About
China Redstone Group, Inc.
China
Redstone is a cemetery developer and provider of cemetery products and services
in Chongqing, China, through its contractually controlled affiliate Chongqing
Foguang Tourism Development (Group) Co., Ltd. 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.
About
Non-GAAP Financial Measures
This
press release contains non-GAAP financial measures. The Company believes that
these non-GAAP financial measures are useful to investors because they exclude
non-cash charges that management excludes when it internally evaluates the
performance of the Company's business and makes operating decisions, including
internal budgeting, and performance measurement, because these measures provide
a consistent method of comparison to historical periods. Moreover, management
believes these non-GAAP measures reflect the essential operating activities of
China Redstone Group, Inc. Accordingly, management excludes the change in
derivative liabilities. The Company believes that providing to its investors the
non-GAAP measures that management uses is useful to investors for a number of
reasons. The non-GAAP measures provide a consistent basis for investors to
understand the Company's financial performance in comparison to historical
periods. In addition, it allows investors to evaluate the Company's performance
using the same methodology and information as that used by our management.
Non-GAAP measures are subject to inherent limitations because they do not
include all of the expenses included under GAAP and because they involve the
exercise of judgment of which charges are excluded from the non-GAAP financial
measure. However, our management compensates for these limitations by providing
the relevant disclosure of the items excluded.
Reconciliation
of GAAP Net Income to Adjusted Net Income (Unaudited)
Three
Months Ended December 31,
|
2010
|
2009
|
||||||
GAAP
Net (loss) income
|
$ | 4,980,823 | $ | 4,156,478 | ||||
Change
in fair value of derivative liabilities
|
$ | ( 329,606 | ) | -- | ||||
Adjusted
net income after tax
|
$ | 5,310,429 | $ | 4,156,478 | ||||
Weighted
Average Shares Outstanding
|
12,672,262 | 8,800,000 | ||||||
Adjusted
Earnings Per Share
|
$ | 0.42 | $ | 0.47 |
Nine
Months Ended December 31,
|
2010
|
2009
|
||||||
GAAP
Net (loss) income
|
$ | 14,499,634 | $ | 10,044,238 | ||||
Change
in fair value of derivative liabilities
|
$ | 334,893 | -- | |||||
Adjusted
net income after tax
|
$ | 14,252,445 | $ | 10,044,238 | ||||
Weighted
Average Shares Outstanding
|
12,756,706 | 8,800,000 | ||||||
Adjusted
Earnings Per Share
|
$ | 1.12 | $ | 1.14 |
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.
Contacts:
HC
International, Inc.
Ted
Haberfield, Executive VP
Tel:
+1-760-755-2716
Email:
thaberfield@hcinternational.net
--
Financial Tables –
CONSOLIDATED
BALANCE SHEETS
|
December
31, 2010
|
March
31, 2010
|
|||||||
A S
S E T S
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
8,714,926
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$
|
9,367,276
|
||||
Inventory
|
8,936,947
|
11,194,905
|
||||||
Work
in progress - cemetery property
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20,632,927
|
—
|
||||||
Other
current assets
|
3,810
|
2,430
|
||||||
TOTAL
CURRENT ASSETS
|
38,288,610
|
20,564,611
|
||||||
PROPERTY
AND EQUIPMENT, NET
|
7,156,000
|
7,241,174
|
||||||
OTHER
NON-CURRENT ASSETS
|
||||||||
Costs
incurred for real estate projects in progress being held for
sale
|
8,798,600
|
10,122,300
|
||||||
Related
party receivable
|
—
|
1,408,320
|
||||||
Prepaid
lease expense
|
783,900
|
787,412
|
||||||
Intangible
assets , net
|
11,915,640
|
11,787,903
|
||||||
TOTAL
OTHER NON-CURRENT ASSETS
|
21,498,140
|
24,105,935
|
||||||
TOTAL
ASSETS
|
$
|
66,942,750
|
51,911,720
|
|||||
LIABILITIES & STOCKHOLDERS
' EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$
|
39,590
|
$
|
113,197
|
||||
Welfare
payable
|
100,372
|
97,064
|
||||||
Taxes
payable
|
1,782,803
|
1,441,490
|
||||||
Other
accrued payables
|
70,739
|
76,507
|
||||||
Current
portion of deferred revenue
|
442,262
|
425,000
|
||||||
Accrued
inventory purchases
|
—
|
443,036
|
||||||
Short-term
notes payable
|
—
|
2,474,829
|
||||||
Warrant
derivative liability
|
1,031,433
|
1,366,326
|
||||||
TOTAL
CURRENT LIABILITIES
|
3,467,199
|
6,437,449
|
||||||
LONG-TERM
LIABILITIES
|
||||||||
Long-term
other payables
|
597,223
|
—
|
||||||
Deferred
revenue
|
9,604,898
|
9,625,403
|
||||||
TOTAL
LONG-TERM LIABILITIES
|
10,202,121
|
9,625,403
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
—
|
—
|
||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock, 20,000,000 shares authorized,
|
—
|
—
|
||||||
$0.001
par value; no shares issued and outstanding
|
||||||||
Common
stock, 100,000,000 shares authorized,
|
12,673
|
12,402
|
||||||
$0.001
par value; 12,672,262 and 12,402,262 shares
|
||||||||
issued
and outstanding, respectively
|
||||||||
Additional-paid-in
capital
|
16,927,435
|
15,488,593
|
||||||
Retained
earnings
|
32,661,497
|
18,161,863
|
||||||
Accumulated
other comprehensive income
|
3,671,825
|
2,186,010
|
||||||
TOTAL
STOCKHOLDERS' EQUITY
|
53,273,430
|
35,848,868
|
||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
66,942,750
|
$
|
51,911,720
|