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| 8-K - Artistry Publications Inc | v194293_8-k.htm |
Exhibit
99.1
China
Redstone Group Reports First Quarter Financial Results
For
the Quarter ended June 30, 2010
CHONGQING, China, August 16, 2010
– China Redstone Group, Inc. (OTC Bulletin Board: CGPI.OB) ("China
Redstone" or the "Company"), the largest private provider of cemetery products
and services in Chongqing, China, today announced financial results of the first
fiscal quarter ended June 30, 2010.
|
-
|
Revenue increased 45.4% to
$12.1 million
|
|
-
|
Non-GAAP adjusted net income
increased 22.5% to $3.9 million with adjusted EPS of
$0.30
|
|
-
|
Gross margin increased 740
basis points to 60.5%
|
|
-
|
China Redstone reiterates
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 August 17, 2010 at 10:30am
ET
|
SUMMARY
FINANCIALS
|
First
Quarter Fiscal 2011 Results (unaudited)
|
|||
|
Q1 Fiscal 2011
|
Q1 Fiscal 2010
|
CHANGE
|
|
|
Net
Sales
|
$12.1
million
|
$8.3
million
|
+45.4%
|
|
Gross
Profit
|
$7.3
million
|
$4.4
million
|
+65.7%
|
|
GAAP
Net Income
Adjusted
Non-GAAP Net Income
|
$4.7
million
$3.9
million (1)
|
$3.2
million
$3.2
million
|
+52.1%
+22.5%
|
|
GAAP
EPS (Diluted)
Adjusted
Non-GAAP EPS (Diluted)
|
$0.38
$0.30
(1)
|
$0.36
$0.36
|
+5.5%
-16.7%
|
|
Weighted
Average Shares
|
12.7
million
|
8.8
million
|
+44.0%
|
*Excluding gain on change in fair
value of warrants of $0.9 million for Q1 2011. For more information
about the non-GAAP financial measures contained in this press release, please
see "About Non-GAAP Financial Measures" below.
First
Quarter Fiscal 2011 Financial Results
Revenue
for the first quarter of fiscal year fiscal 2011 increased 45.4% to
approximately $12.1 million compared to $8.3 million for the first quarter of
fiscal 2010. All revenue in the quarter was generated by cemetery
plot sales. The significant increase in revenue was due to enhanced marketing
and advertising efforts and the development of new cemetery plots. For the first
fiscal quarter of 2011, which ended June 30, 2010, the Company sold 1,854 plots,
representing a 12.3% sequential increase from the three months ended March 31,
2010. The average sales price per plot for the first quarter of fiscal 2011 was
$6,557, 14% higher than the average sales price for fiscal 2010 and well above
the $5,000 to $6,250 that the Company has forecasted for fiscal year ending
March 31, 2011.
|
April
2010
|
May
2010
|
June
2010
|
FY10
|
FY11
Guidance
|
||||||
|
Cemetery
Plot Sales
|
621
|
602
|
627
|
6730
|
7000
|
|||||
|
Average
Sales Per Plot
|
$
|
6,407
|
$
|
6,525
|
$
|
6,738
|
$
|
5,750
|
$
|
5,000-$6,250
|
"We are
pleased with the positive operating results generated from our cemetery plot
sales," 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.”
Cost of
goods sold for the first quarter of fiscal 2011 was approximately $4.8 million
or 39.5% of revenues, as compared to $3.9 million or 46.9% of revenues for the
first quarter of fiscal 2010. Gross profits for the first quarter of fiscal 2011
were $7.3 million with gross margins of 60.5%, compared to $4.4 million in gross
profit and gross margins of 53.1% for the first quarter of fiscal 2010. The
increase in gross profit was primarily due to a decrease in cemetery development
costs per plot and an increase in sales of deluxe tombs which generate
approximately 20% higher margins than traditional tombs. In addition, the
Company used a new technology applied by its contractors for casting shale stone
memorials which led to a 60% decrease in the use of raw materials.
Operating
expenses for the first quarter of fiscal 2011 were approximately $1.8 million,
an increase of 507.5% compared to the same period in fiscal 2010, which resulted
from higher advertising expenses to attract more customers, and higher general
and administrative expenses commensurate with increased sales
activities.
Operating
income for the first quarter of fiscal 2011 totaled approximately $5.5 million,
a 34.1% increase from $4.1 million reported for the first quarter of fiscal
2010. Operating margins were 45.2% and 49.0% for the first quarter of fiscal
2011 and 2010, respectively.
GAAP net
income was approximately $4.7 million for the first quarter of fiscal 2011, a
52.1% increase from the first quarter of fiscal 2010. Diluted earnings per share
were $0.38 for the first quarter of fiscal 2011 compared to $0.36 for the first
quarter of fiscal 2010, based upon 12.7 million and 8.8 million diluted common
shares outstanding, respectively. Adjusted Non-GAAP net income for the first
quarter of fiscal 2011, excluding gain on change in fair value of warrants of
$0.9 million, was $3.9 million, or $0.30 per diluted common share based on 12.7
million diluted common shares outstanding at June 30, 2010.
Balance
Sheet and Cash Flow
Cash and
cash equivalents totaled $9.4 million on June 30, 2010, compared to $9.4 million
on March 31, 2010. Inventory was approximately $17.5 million on June 30, 2010,
versus approximately $11.2 million on March 31, 2010. The Company had a current
ratio of 5.2 to 1 and stockholders’ equity of $42.8 million, with total assets
of $57.7 million versus total liabilities of $14.9 million on June 30,
2010.
For the
first quarter of fiscal 2011, the Company generated $0.6 million in cash from
operations versus $3.2 million for the same period in the first quarter of
fiscal 2010. The decrease was primarily to cash paid for inventory developed for
sale.
“The
beginning of 2011 fiscal year has started off well for China Redstone, having
sold 1,854 plots during the first fiscal quarter,” added Mr. Ran. “As the
largest developer and provider of cemetery products and services in the most
populated of China's four provincial level municipalities, China Redstone is
well positioned to capitalize on growth in the death care industry. We are
tracking our target to surpass 7,000 cemetery plots this fiscal year. The
Company continues to experience strong demand for its cemetery plots due to
rapid growth in our customers' disposal income, the convenient location of our
cemetery which services a population with 31.4 million residents in Chongqing,
and the Fengshu created by the optimal lakefront location in a peaceful
property. With 80% of our land still available for development, a strong working
capital position and cash flow positive business, we are well positioned to
capitalize on our growth plan."
2
Conference
Call
The
conference call will take place at 10:30 a.m. ET on Tuesday, August 17, 2010.
Interested participants should call 1-877-941-4776 when calling within the
United States or 1-480-629-9762 when calling internationally (passcode
4344215).
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=0000793A, or visiting http://www.viavid.net,
where the webcast can be accessed through August 24, 2010.
A
playback will be available through August 24, 2010. To listen, please call
1-877-870-5176 within the United States or 1-858-384-5517 when calling
internationally (passcode 4344215).
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 June 30,
|
2010
|
2009
|
||||||
|
GAAP
Net (loss) income
|
$ | 4,796,815 | $ | 3,153,602 | ||||
|
Non-GAAP
|
||||||||
|
Change
in fair value of derivative liabilities
|
$ | (934,432 | ) | -- | ||||
|
Adjusted
Net income
|
$ | 3,862,383 | $ | 3,153,602 | ||||
|
Weighted
Average Shares Outstanding
|
12,668,095 | 8,800,000 | ||||||
|
Adjusted
Earnings Per Share
|
$ | 0.30 | $ | 0.36 | ||||
3
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.
For
further information, contact:
China
Redstone Group, Inc.
Mr.
Michael Wang, CFO
Tel:
+1-888-600-7955
Or
Ted
Haberfield , Executive VP
HC
International, Inc.
Tel:
+1-760-755-2716
Email:
thaberfield@hcinternational.net
Web:
http://www.hcinternational.net
-- Tables
to Follow –
4
|
CHINA
REDSTONE GROUP, INC
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
June
30, 2010
|
March
31, 2010
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 9,353,964 | $ | 9,367,276 | ||||
|
Inventory
|
17,455,598 | 11,194,905 | ||||||
|
Other
current assets
|
5,288 | 2,430 | ||||||
|
TOTAL
CURRENT ASSETS
|
26,814,850 | 20,564,611 | ||||||
|
PROPERTY
AND EQUIPMENT, NET
|
7,388,711 | 7,241,174 | ||||||
|
OTHER
NON-CURRENT ASSETS
|
||||||||
|
Costs
incurred for real estate projects in progress
|
8,543,400 | 10,122,300 | ||||||
|
Related
party receivable
|
1,414,080 | 1,408,320 | ||||||
|
Prepaid
lease expense
|
780,138 | 787,412 | ||||||
|
Intangible
assets, net
|
11,570,032 | 11,787,903 | ||||||
|
TOTAL
OTHER NON-CURRENT ASSETS
|
22,307,650 | 24,105,935 | ||||||
|
TOTAL
ASSETS
|
$ | 56,511,211 | $ | 51,911,720 | ||||
|
LIABILITIES
& STOCK HOLDERS ' EQUITY
|
||||||||
|
CURRENT
LIABILITIES
|
||||||||
|
Accounts
payable
|
$ | 84,162 | $ | 113,197 | ||||
|
Welfare
payable
|
97,461 | 97,064 | ||||||
|
Taxes
payable
|
1,752,361 | 1,441,490 | ||||||
|
Other
accrued payables
|
88,725 | 76,507 | ||||||
|
Current
portion of deferred revenue
|
429,434 | 425,000 | ||||||
|
Accrued
inventory purchases
|
- | 443,036 | ||||||
|
Short-term
notes payable
|
2,043,051 | 2,474,829 | ||||||
|
Warrant
derivative liability
|
431,894 | 1,366,326 | ||||||
|
TOTAL
CURRENT LIABILITIES
|
4,927,088 | 6,437,449 | ||||||
|
LONG-TERM
LIABILITIES
|
||||||||
|
Deferred
revenue
|
9,543,773 | 9,625,403 | ||||||
|
TOTAL
LONG-TERM LIABILITIES
|
9,543,773 | 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
|
16,726,359 | 15,488,593 | ||||||
|
Retained
earnings
|
22,958,678 | 18,161,863 | ||||||
|
Accumulated
other comprehensive income
|
2,342,640 | 2,186,010 | ||||||
|
TOTAL
STOCKHOLDERS' EQUITY
|
42,040,350 | 35,848,868 | ||||||
|
|
||||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 56,511,211 | $ | 51,911,720 | ||||
5
|
CHINA
REDSTONE GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
|
For
the three months ended
|
For
the three months ended
|
|||||||
|
June
30, 2010
|
June
30, 2009
|
|||||||
|
REVENUE
|
||||||||
|
Cemetery
|
$ | 12,094,587 | $ | 8,317,528 | ||||
|
Park
construction services
|
- | - | ||||||
|
Total
revenue
|
12,094,587 | 8,317,528 | ||||||
|
COST
OF GOODS SOLD
|
||||||||
|
Cemetery
|
4,773,458 | 3,899,886 | ||||||
|
Park
construction services
|
- | - | ||||||
|
Total
cost of goods sold
|
4,773,458 | 3,899,886 | ||||||
|
GROSS
PROFIT
|
7,321,129 | 4,417,642 | ||||||
|
OPERATING
EXPENSES
|
||||||||
|
Selling
expenses
|
68,925 | 44,920 | ||||||
|
General
& administrative expenses
|
1,781,798 | 293,293 | ||||||
|
TOTAL
OPERATING EXPENSES
|
1,850,723 | 338,213 | ||||||
|
INCOME
FROM OPERATIONS
|
5,470,406 | 4,079,429 | ||||||
|
OTHER
INCOME (EXPENSES)
|
||||||||
|
Other
income
|
117,844 | 103,281 | ||||||
|
Gain
on change in fair value of warrants classified as
derivatives
|
934,432 | - | ||||||
|
Interest
expenses
|
(56,257 | ) | (59,400 | ) | ||||
|
Interest
income
|
15,768 | 2,429 | ||||||
|
Rental
income, net
|
61,306 | 65,433 | ||||||
|
Non-operating
expenses
|
(2,611 | ) | - | |||||
|
TOTAL
OTHER INCOME
|
1,070,482 | 111,743 | ||||||
|
INCOME
BEFORE INCOME TAXES
|
6,540,888 | 4,191,172 | ||||||
|
INCOME
TAXES
|
(1,744,073 | ) | (1,037,570 | ) | ||||
|
NET
INCOME
|
$ | 4,796,815 | $ | 3,153,602 | ||||
| 3,862,383 | 3,153,602 | |||||||
|
OTHER
COMPREHENSIVE INCOME
|
||||||||
|
Foreign
currency translation
|
156,630 | 18,953 | ||||||
|
COMPREHENSIVE
INCOME
|
$ | 4,953,445 | $ | 3,172,555 | ||||
|
EARNINGS
PER SHARE:
|
||||||||
|
EARNINGS
PER SHARE - BASIC
|
$ | 0.38 | $ | 0.36 | ||||
|
EARNINGS
PER SHARE - DILUTED
|
$ | 0.38 | $ | 0.36 | ||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING - BASIC
|
12,668,095 | 8,800,000 | ||||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING - DILUTED
|
12,668,095 | 8,800,000 | ||||||
6
|
CHINA
REDSTONE GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For
the three months ended
|
For
the three months ended
|
|||||||
|
June
30, 2010
|
June
30, 2009
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
Income
|
$ | 4,796,815 | $ | 3,153,602 | ||||
|
Adjustments
to reconcile net income to
|
||||||||
|
net cash provided by operating activities:
|
||||||||
|
Depreciation
and amortization
|
117,912 | 62,746 | ||||||
|
Gain
on change in fair value of warrants classified as
derivatives
|
(934,432 | ) | - | |||||
|
Stock
issued for consulting services
|
1,178,975 | - | ||||||
|
Stock
issued for board of director fees
|
59,063 | - | ||||||
|
Changes
in assets and liabilities:
|
||||||||
|
Accounts
receivable
|
- | 61,384 | ||||||
|
Inventory
|
(4,328,524 | ) | (546,044 | ) | ||||
|
Prepaid
lease expense
|
- | 10,471 | ||||||
|
Other
currents assets
|
(6,906 | ) | - | |||||
|
Accounts
payable
|
(29,460 | ) | 410,200 | |||||
|
Taxes
payable
|
304,975 | 195,640 | ||||||
|
Other
accrued payables
|
11,905 | 1,901 | ||||||
|
Accrued
inventory purchases
|
(444,849 | ) | - | |||||
|
Deferred
revenue
|
(118,302 | ) | (103,190 | ) | ||||
|
Net
cash provided by operating activities
|
607,172 | 3,246,710 | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Capital
expenditures
|
(225,795 | ) | - | |||||
|
Costs
incurred for real estate projects in progress
|
- | (3,516,000 | ) | |||||
|
Net
cash used in investing activities
|
(225,795 | ) | (3,516,000 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITY:
|
||||||||
|
Payment
on note payable
|
(441,900 | ) | - | |||||
|
Net
cash used in financing activities
|
(441,900 | ) | - | |||||
|
Net
(decrease) increase in cash and cash equivalents
|
(60,523 | ) | (269,290 | ) | ||||
|
Effects
of foreign exchange
|
47,211 | 31,725 | ||||||
|
Cash
and cash equivalents, beginning of period
|
9,367,276 | 1,392,961 | ||||||
|
Cash
and cash equivalents, end of period
|
$ | 9,353,964 | $ | 1,155,396 | ||||
|
SUPPLIMENTAL
INFORMATION
|
||||||||
|
Interest
paid
|
$ | 56,257 | $ | 59,552 | ||||
|
Taxes
paid
|
$ | 1,744,073 | $ | 1,034,519 | ||||
7