Liuyang Fireworks Reports 2009 Financial Results

TORONTO, April 29 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK) today reported its financial results for the three- and 12-month periods ended December 31, 2009. All amounts are in Canadian dollars unless otherwise stated.

    
    Selected 2009 Financial Highlights
    -------------------------------------------------------------------------
    In thousands except share and % data     FY 2009     FY 2008      Change
    -------------------------------------------------------------------------
    Revenue                                  $13,408      $8,809        +52%
    -------------------------------------------------------------------------
    Gross profit                              $5,549      $4,075        +36%
    -------------------------------------------------------------------------
    Gross margins                              41.3%       46.3%         -5%
    -------------------------------------------------------------------------
    EBIDTA(1)                                 $1,590      $1,914        -17%
    -------------------------------------------------------------------------
    Adjusted net income                       $1,274      $1,280           0
    -------------------------------------------------------------------------
    Net income                                  $637      $1,280        -50%
    -------------------------------------------------------------------------
    Earnings per share                         $0.02         N/A         N/A
    -------------------------------------------------------------------------
    Cash and Cash equivalents                 $1,999      $1,935         +3%
    -------------------------------------------------------------------------
    Working capital                           $4,507      $1,882        139%
    -------------------------------------------------------------------------
    

"Our first year of operations as a public company was marked by several significant achievements," said Miao Hu, President and Chief Executive Officer, Liuyang Fireworks Limited. "Most notably, we increased our revenue by more than 50% due to our strategy of expanding domestic sales in China while growing our base of international customers. This growth was achieved because of the reputation we are developing for our quality products, innovative packaging and focus on customer safety."

    
    2009 Highlights:
    -   Completed a qualifying transaction for listing on the TSX Venture
        Exchange through a reverse take over of Strive Best Holdings.
    -   Completed a non-brokered private placement of 5,178,364 shares for
        gross proceeds of $3.1 million.
    -   Named Jacky Long Chief Financial Officer, effective August 17, 2009.
    -   Signed an exclusive sales agreement with a Quebec-based fireworks
        distributor.
    -   Increased its controlling interest of Far Ocean Joint Venture Company
        to 73% through a cash contribution of $1.3 million.
    -   Received a $1.5 million (U.S.) purchase order from an American
        distributor of fireworks.

    Highlights subsequent to year end
    -   Announced record sales of $2.0 million for the 2010 Chinese New Year
        selling season.
    -   Awarded approximately $154,000, by the City of Changsha for becoming
        the city's first company to be publicly listed in North America.
    -   Launched Hunan Liuyang Fireworks Display Art Company, a 100 percent-
        owned subsidiary. The subsidiary will enable Liuyang Fireworks to
        market its fireworks products throughout China, directly to large
        event organizers as well as to individuals hosting small events where
        fireworks are consumed.
    

Review of 2009 Financial Results

Revenue for FY 2009 was $13.4 million, up 52% from $8.8 million for FY 2008. Revenue growth was due to an expanded international distribution network, higher sales emanating from Europe and an increased focus on developing domestic sales in China.

Gross profit for FY 2009 was $7.9 million, or 41.3% of sales, compared to $4.7 million, or 46.3% of sales, for FY 2008. The decline in gross margins was attributable to the Company's decision to grow market share, particularly in China, through special incentive pricing temporarily implemented during the year.

Total expenses for FY 2009 were $4.4 million, up 85% from $2.4 million for FY 2008. The growth was principally due to an increase in general and administrative expenses of more $1 million stemming from the Company's public listing activities and higher salaries for an expanded management team. The increase in total expenses was also due to stock-based compensation charges of $0.6 million. Liuyang operated as a private company in 2008 and became listed on the TSX Venture Exchange on June 29, 2009 following the close of a qualifying transaction.

EBITDA for FY 2009 was $1.6 million, down from $1.9 million for FY 2008. The decline was principally due to higher administrative expenses.

Net income for FY 2009 was $636,914, or $0.02 per fully diluted share, after taxes of $439,643 were recorded. Excluding a non-controlling interest share of income of $70,768 and the stock-based compensation charge of $566,650, adjusted net income for FY 2009 was $1.3 million. Liuyang generated net income of $1.3 million for FY2008.

At December 31, 2009, Liuyang held cash and cash equivalents of $2 million and working capital of $4.5 million. These compare to $1.9 million and $1.9 million, respectively, for FY 2008.

    
    Selected Fourth Quarter Financial Highlights
    -------------------------------------------------------------------------
    In thousands except share and % data     Q4 2009     Q4 2008      Change
    -------------------------------------------------------------------------
    Revenue                                   $4,710      $2,630        +79%
    -------------------------------------------------------------------------
    Gross profit                              $1,665      $1,084        +54%
    -------------------------------------------------------------------------
    Gross margins                                35%         41%         -6%
    -------------------------------------------------------------------------
    EBIDTA (loss)                               $(71)       $393       -$464
    -------------------------------------------------------------------------
    Net income (loss)                          $(338)       $209       -$547
    -------------------------------------------------------------------------
    Earnings (loss) per share                 $(0.01)        N/A         N/A
    -------------------------------------------------------------------------
    

Revenue for Q4 2009 was $4.7 million up 79% from $2.6 million for Q4 2008. The growth was chiefly due to an increase in domestic sales in China.

Gross profit for Q4 2009 was $1.7 million, or 35% of sales, compared to $1.1 million, or 41% of sales, for Q4 2008. The decline in gross margins was attributable to the Company's decision to grow market share, particularly in China, through special incentive pricing.

Total operating expenses for Q4 2009 were $2 million, up from $0.7 million for Q4 2008. The increase was principally due to higher general and administrative expenses relating to the Company's public listing activities and higher salaries for an expanded management team.

EBITDA for Q4 2009 was negative $71,322. This compares to positive EBITDA of $0.4 million for Q4 2008. The decrease, totaling $0.5 million, was due to higher non-cash stock-based compensation costs and higher general and administrative expenses.

The Company incurred a net loss of $0.3 million, or $0.01 per fully diluted share, for Q4 2009, down from net income of $0.2 million for the corresponding period of 2008. The decline was due to stock-based compensation charges as well as costs incurred as a public company.

Outlook

"Since the start of the current fiscal year, we have completed a number of milestones in support of our long-term strategy of vertical integration within China's fireworks industry," said Mr. Hu. "In particular, we have launched a display company that will allow us to market our fireworks throughout China, especially to large event organizers. This achievement, coupled with our ongoing commitment to completing up to three acquisitions of fireworks wholesalers in 2010, provides a solid foundation for growth over the next several years."

Liuyang's consolidated financial statements for the year ended December 31, 2009 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks that are distributed domestically and in more than 15 countries in North America, South America and Europe. The Company has more than 16 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers. Liuyang's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan, China where more than half of the world's fireworks are produced.

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

    
    -----------
    (1) Earnings before interest, taxes, depreciation and amortization
        (EBIDTA) is often used as a measure of financial performance.
        However, EBIDTA is a not a term that has specific meaning in
        accordance with generally accepted accounting principles, and may be
        calculated differently by other companies. Liuyang reconciles EBIDTA
        to its net income.
    

SOURCE Liuyang Fireworks Limited

For further information: For further information: Jacky Long, Chief Financial Officer, Liuyang Fireworks Limited, Tel: (416) 613-0208 ext 206, jackylong@farocean.com; Joe Racanelli, Investor Relations, The Equicom Group, Tel: (416) 815-0700 ext 243, Email: jracanelli@equicomgroup.com

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