Nova LifeStyle, Inc. Reports 2011 Fiscal Year Results – Sales Up 50%, Net Income Up 28%

COMMERCE, Calif., April 2, 2012 /PRNewswire/ -- Nova LifeStyle, Inc. (“Nova” or “Nova LifeStyle”) (OTCBB: STVS; website: www.novalifestyle.com), an innovative global designer and modern lifestyle furniture company headquartered in California, today announced its financial results for the year ended December 31, 2011, as reported on its annual report on Form 10-K filed on March 30, 2012.

2011 HIGHLIGHTS

  • Net sales of $43.16 million, an increase of 50% year-over-year
  • Gross profit increased 60% to $12.11 million
  • Net income of $5.37 million, an increase of 28% year-over-year
  • Acquired Diamond Sofa (www.diamondsofa.com), an urban contemporary national furniture brand sold to major U.S. furniture companies
  • 2012 Guidance: Anticipate net sales of between $50 million and $58 million and net income of between $7 million and $8 million from organic growth

   
   

Year Ended

December 31, 2011

    

Year Ended

December 31, 2010

    

YoY% Change

    

Net sales

  

$

43,162,026

    

$

28,818,982

      

50%

    

Gross profit

  

$

12,113,074

    

$

7,576,958

      

60%

    

Gross profit margin

    

28%

      

26%

            

Income from operations

  

$

6,939,676

    

$

5,266,672

      

32%

    

Operating margin

    

16%

      

18%

            

Net income

  

$

5,365,165

    

$

4,203,009

      

28%

    

Net income margin

    

12%

      

15%

            

Diluted EPS

  

$

0.37

    

$

0.43

      

(14)%

    
   
                         

 

MANAGEMENT COMMENTS

Tawny Lam, President of Nova LifeStyle, commented: "We are pleased with our strong growth and performance in 2011. Our acquisition of Diamond Sofa, a well-recognized brand in the U.S. with a niche in the urban contemporary furniture market, provides us with a strong distribution channel to the top 100 U.S. furniture companies. We look forward to expanding our e-commerce business and continuing to market our Nova-branded products to the international markets. Our strong sales and net income growth demonstrate consumers' appetite for our modern contemporary products. We look forward to continuing our path of strong sales and earnings growth in 2012."

NET SALES

Net sales in 2011 were $43.16 million, an increase of 50% from $28.82 million in 2010. The increase in net sales resulted primarily from a 19% increase in sales volume in 2011 and our acquisition of the Diamond Sofa brand in August 2011, which contributed $6.22 million in additional sales for the year. Our largest selling product categories in 2011 were sofas, dining tables and chairs, which accounted for approximately 22%, 17% and 15% of sales, respectively. Sales to international markets increased $12.37 million in 2011 compared to 2010 principally as a result of increased sales in North America. We believe that we can continue to expand our sales in the U.S. and international markets as we integrate the Diamond Sofa brand and increase direct sales as we expand and explore new markets worldwide. Overall sales to China also increased 24% to $10.32 million in 2011 compared to $8.35 million in 2010. Sales from franchisees selling Nova-branded products in China contributed approximately $5.51 million, constituting 53% of total China sales during 2011, compared to $1.69 million or 20% in 2010. We anticipate increasing sales volume in China as our franchise store network continues to expand and we introduce new lines of branded products in 2012.

GROSS PROFIT

Gross profit increased 60% to $12.11 million in 2011. Gross profit margin increased to 28% in 2011 from 26% in the same period last year, primarily as a result of increased sales volume and overall average selling price, and changes in our sales and marketing strategy to expand in the U.S. and China markets. Management believes that gross profit margin will stabilize at approximately 30% going forward as our product mix broadens, sales volume increases and we adjust pricing based on rising raw material costs.

OPERATING EXPENSES

Operating expenses, consisting of selling, general and administrative expenses, were $5.17 million in 2011, an increase of 124% compared to 2010, as expected. Selling expense increased as we continued expanding in the China retail market by hiring additional sales staff and increasing advertising and promotional marketing. General and administration expense increased because of costs associated with workforce expansion in China and expense related to our acquisitions in 2011 of Nova Furniture and the Diamond Sofa brand.

NET INCOME

Net income was $5.37 million in 2011, an increase of 28% year-over-year. Net profit margin was 12%, a decrease of 3% from the 2010 period due primarily to increased sales and gross profit margin, but offset by increased operating expenses.

ABOUT NOVA LIFESTYLE, INC.

Nova LifeStyle, Inc., a U.S. company headquartered in California, is an innovative designer and modern lifestyle furniture company. Nova's products are made in the U.S. and Asia and marketed worldwide. Nova's collections of lifestyle furniture brands include Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili and others. Nova's products feature urban contemporary styles with comfort and functionality in matching furniture collections and upscale luxury designs appealing to lifestyle-conscious middle and upper middle-income consumers. To learn more about Nova LifeStyle, Inc., please visit www.novalifestyle.com.

SAFE HARBOR STATEMENT

All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.

CORPORATE CONTACT:
Tawny Lam
President, Nova LifeStyle, Inc.
Tel: (323) 888-9999
Email: info@novalifestyle.com
www.novalifestyle.com
www.diamondsofa.com

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

  
   

2011

    

2010

    
               

Assets

              
               
               

Current Assets

              

Cash and cash equivalents

  

$

2,505,179

    

$

985,004

    

Accounts receivable

    

18,974,612

      

5,921,872

    

Accounts receivable - related party

    

28,289

      

565,170

    

Due from factor

    

203,351

      

--

    

Advance to suppliers

    

349,767

      

326,010

    

Inventory

    

1,848,081

      

1,017,704

    

Prepaid expenses and other receivable

    

113,853

      

126,394

    

Deferred tax asset

    

156,974

      

115,237

    
                   
                   

Total Current Assets

    

24,180,106

      

9,057,391

    
                   
                   

Noncurrent Assets

                  

Heritage and cultural assets

    

128,687

      

--

    

Plant, property and equipment, net

    

8,721,186

      

8,192,937

    

Construction in progress

    

91,466

      

75,498

    

Construction deposit

    

634,830

      

--

    

Goodwill

    

218,606

      

--

    

Intangible assets, net

    

724,465

      

471,812

    

Deferred tax asset

    

118,144

      

--

    
                   
                   

Total Noncurrent Assets

    

10,637,384

      

8,740,247

    
                   
                   

Total Assets

  

$

34,817,490

    

$

17,797,638

    
   
                 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

DECEMBER 31, 2011 AND 2010

  
   

2011

    

2010

    
               

Liabilities and Stockholders' Equity

              
               

Current Liabilities

              

Accounts payable

  

$

6,758,058

    

$

1,160,634

    

Advance from customers

    

91,021

      

25,016

    

Accrued liabilities and other payables

    

834,128

      

1,065,421

    

Taxes payable

    

198,984

      

197,785

    

Due to related party

    

--

      

197,776

    
                   

Total Current Liabilities

    

7,882,191

      

2,646,632

    
                   

Noncurrent Liabilities

                  

Deferred rent payable

    

58,949

      

43,169

    

Deferred tax liability, net

    

--

      

1,274

    

Income tax payable

    

4,016,266

      

2,368,795

    
                   

Total Noncurrent Liabilities

    

4,075,215

      

2,413,238

    
                   

Total Liabilities

    

11,957,406

      

5,059,870

    
                   

Contingencies and Commitments

                  
                   

Stockholders' Equity

                  
                   

Common stock, $0.001 par value; 75,000,000 shares authorized,

 17,898,267 and 9,685,000 shares issued and outstanding

 as of December 31, 2011 and 2010, respectively

    

17,898

      

9,685

    

Additional paid-in capital

    

17,074,535

      

10,902,815

    

Subscription receivable

    

(1,950,000)

      

--

    

Statutory reserves

    

6,241

      

6,241

    

Accumulated other comprehensive income

    

2,138,974

      

1,611,756

    

Retained earnings

    

5,572,436

      

207,271

    
                   

Total Stockholders' Equity

    

22,860,084

      

12,737,768

    
                   

Total Liabilities and Stockholders' Equity

  

$

34,817,490

    

$

17,797,638

    
   
                 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

  
   

Years Ended December 31,

    
   

2011

    

2010

    
               

Net Sales                                                                       

(Including sales to related parties of $902,638 and $1,491,875

during the years ended December 31, 2011 and 2010, respectively)

  

$

43,162,026

    

$

28,818,982

    
                   

Cost of Sales

    

31,048,952

      

21,242,024

    
                   

Gross Profit

    

12,113,074

      

7,576,958

    
                   

Operating Expenses

                  

Selling expenses

    

1,865,086

      

959,673

    

General and administrative expenses

    

3,308,312

      

1,205,881

    

Loss on disposal of plant, property and equipment

    

--

      

144,732

    
                   

Total Operating Expenses

    

5,173,398

      

2,310,286

    
                   

Income From Operations

    

6,939,676

      

5,266,672

    
                   

Other Income (Expenses)

                  

Non-operating income

    

52,043

      

57,844

    

Foreign exchange transaction loss

    

(90,609)

      

(66,419)

    

Interest income

    

1,402

      

2,549

    

Financial expense

    

(76,836)

      

(22,556)

    
                   

Total Other Expenses, Net

    

(114,000)

      

(28,582)

    
                   

Income Before Income Tax

    

6,825,676

      

5,238,090

    
                   

Income Tax Expense

    

1,460,511

      

1,035,081

    
                   

Net Income

    

5,365,165

      

4,203,009

    
                   

Other Comprehensive Income

                  

Foreign currency translation

    

527,218

      

294,871

    
                   

Comprehensive Income

  

$

5,892,383

    

$

4,497,880

    
                   

Basic weighted average shares outstanding

    

14,506,915

      

9,685,000

    

Diluted weighted average shares outstanding

    

14,697,206

      

9,685,000

    
                   

Basic net earnings per share

  

$

0.37

    

$

0.43

    

Diluted net earnings per share

  

$

0.37

    

$

0.43

    
   
                 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

  
   

2011

    

2010

    
               

Cash Flows From Operating Activities

          

 Net Income

  

$

5,365,165

    

$

4,203,009

    

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

                  

Depreciation and amortization

    

663,031

      

374,123

    

Loss on fixed assets disposal

    

--

      

144,732

    

Changes in deferred tax

    

(172,474)

      

(42,407)

    

Changes in operating assets and liabilities:

            

Accounts receivable

    

(11,784,975)

      

(2,448,235)

    

Accounts receivable - related party

    

536,881

      

80,336

    

Advance to suppliers

    

(13,609)

      

(156,830)

    

Inventory

    

4,383

      

1,322,444

    

Note receivable

    

--

      

16,763

    

Other current assets

    

18,365

      

45,123

    

Accounts payable

    

3,754,075

      

149,571

    

Advance from customers

    

65,266

      

(96,590)

    

Accrued expenses and other payables

    

(412,246)

      

304,174

    

Deferred rent payable

    

13,243

      

4,049

    

Taxes payable

    

1,497,129

      

995,422

    
                   

Net Cash (Used in) Provided by Operating Activities

    

(465,766)

      

4,895,684

    
                   

Cash Flows From Investing Activities

                  

Deposit on factory construction

    

(619,310)

      

--

    

Cash received from acquired Diamond Bar Outdoors, Inc.

    

141,231

      

--

    

Acquisition of Diamond Bar Outdoors, Inc.

    

(450,000)

      

--

    

Acquisition of intangible assets

    

(200,000)

      

--

    

Purchase of heritage and cultural assets

    

(125,541)

      

--

    

Purchase of property and equipment

    

(589,185)

      

(4,742,229)

    

Cash paid for construction in progress

    

(11,840)

      

--

    
                   

Net Cash Used in Investing Activities

    

(1,854,645)

      

(4,742,229)

    
                   

Cash Flows From Financing Activities

                  

Advance to related parties

    

(1,560,085)

      

--

    

Repayment from related parties

    

1,357,289

      

332,373

    

Proceeds from subscription receivable

    

450,000

      

--

    

Proceeds from private placement, net

    

3,859,933

      

--

    

Payment for note payable

    

(80,000)

      

--

    

Due from factor

    

(203,351)

      

--

    

Contribution by cash

    

--

      

500,000

    

Dividend paid

    

--

      

(2,172,590)

    
                   

Net Cash Provided by (Used in) Financing Activities

  

$

3,823,786

    

$

(1,340,217)

    
   
                 

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

  
   

2011

    

2010

    
               

Effect of Exchange Rate Changes on

              

 Cash and Cash Equivalents

  

$

16,800

    

$

(500)

    
                   

Net increase (decrease) in cash and cash equivalents

    

1,520,175

      

(1,187,262)

    
                   

Cash and cash equivalents, beginning of year

    

985,004

      

2,172,266

    
                   

Cash and cash equivalents, end of year

  

$

2,505,179

    

$

985,004

    
                   
                   

Supplemental Disclosure of Cash Flow Information

            
                   

Cash paid during the period for:

                  

Income tax payments

  

$

126,702

    

$

78,936

    
                   
                   

Supplemental Disclosure of Non-Cash Financing Activities

    
                   

    Subscription receivable from sales of common stock

  

$

2,400,000

    

$

--

    

    Transfer from construction in progress to fixed assets

  

$

--

    

$

527,839