SOURCE: Nova Lifestyle, Inc.

Nova LifeStyle, Inc.

August 14, 2012 08:30 ET

Nova LifeStyle Reports Sharp Increase in 2012 Second Quarter Sales and Profits; Net Income Grew 176% on a 74% Sales Gain Year Over Year

Company Eyes Another Year of Record Growth Based on Strong Global Consumer Demand for Its Urban Contemporary Designs

COMMERCE, CA--(Marketwire - Aug 14, 2012) -  Nova LifeStyle, Inc. (OTCQB: STVS) (OTCBB: STVS(website: www.novalifestyle.com), a rapidly growing U.S. based designer, manufacturer and global distributor of urban contemporary furniture, today reported its continuing aggressive worldwide expansion generated record results in the second quarter and six months ended June 30, 2012.

Sales in the second quarter grew 74% to $16.15 million, up from $9.26 million in the same period last year, on a 15% increase in sales volume and an approximately 53% increase in average selling price. Net income increased 146% to $1.42 million compared with $0.58 million in the prior year period. Through the first half of 2012, sales were up 82% to $27.15 million, from $14.89 million a year earlier, on a 12% increase in sales volume and an approximately 62% increase in average selling prices. Net income in the first six months of 2012 grew to $2.40 million, up 11% from $1.59 million in the comparable period in 2011.

On a per share basis, 2012 second quarter diluted EPS was $0.08 compared with $0.05 in the same period last year, while 2012 first half diluted EPS was $0.13, compared with $0.13 in the prior year period. Diluted weighted average shares outstanding in last year's second quarter and first half respectively were 11,952,747 and 11,788,314 shares. In the second quarter and first half this year they increased to 18,491,138 and 18,589,410 shares respectively. The increase primarily is a consequence of two successful private placements completed in late 2011 and early 2012 which netted the Company a combined $5.61 million to finance further growth.

U.S. Led Growth

Mr. Jeffrey Wong, CEO, Chairman and Co-Founder of the Company, commented, "In the short time since we have been a public company, following our acquisition of Diamond Sofa in the U.S. in 2011, our progress has been dramatic, setting the stage for continuing strong, balanced global growth. Thus far, our growth has been led by our outstanding performance in the North American market, which produced a year over year sales gain in the second quarter of 129%, to $5.74 million, bolstered by increasing Internet sales and growing penetration of our target 'Top 100' furniture retailers and distributors."

Strong Global Growth As Well

Company President, and Co-Founder of Diamond Sofa, Ms. Tawny Lam, added, "We also have been focused on expanding direct sales of our branded furniture lines in China where year over year sales in the quarter grew 69%, to $4.85 million and we expanded our independently owned furniture franchise stores to more than 100 locations throughout the country. Starting in 2013, this will be complemented by an anticipated major boost in our OEM sales from our recently announced manufacturing agreement with IKEA. Further, in the quarter we saw a 34% sales increase in Europe, to $4.24 million, where despite a tougher economic environment, lifestyle conscious consumers remain highly attracted to the look, feel and perceived value of our urban contemporary furniture lines."

Sale of U.S. Luxury Mattresses in China Underway

"While it is an initiative we have focused on for some time," Ms. Lam added, "after the end of the second quarter, we announced in July what we believe could result in a further significant boost to our sales in China, namely, our first shipment of Ultra Premium 'Made in the USA' organic latex mattresses to our franchise network in China."

The Company said the significant growth potential it sees for these products lies not just in their comfort or the fact that they are made with the highest quality natural latex foam. Of special significance to China's upscale consumers, they are custom manufactured in the U.S. to size standards in China and are generating a strong initial response.

30% Gross Margin Target

During the second quarter and first half of 2012, the Company said that strong demand for its products necessitated increased utilization of third party manufacturers under the Company's supervision. This factor, in combination with increasing raw material prices, especially in China, had an impact on gross profit margins, which in the first half of 2012 were 25% compared with 28% a year earlier. Going forward, management believes gross profit margins will stabilize at approximately 30% as the Company's product mix broadens and more raw material costs are passed along to customers.

Factory Expansion

Additionally, the Company said construction was proceeding on the Phase II expansion of its manufacturing plant in Dongguan. It continues to anticipate completion before the end of the year, which will allow for increased self manufacturing during the course of 2013 in conjunction with its supply agreement with IKEA.

Strong Growth Outlook

Looking ahead, Mr. Wong stated, "We have charted a very aggressive growth course with our primary focus currently on the U.S. and China given the somewhat slower economic recovery we see in Europe. While consumers in the U.S. and China also are exhibiting caution, there nevertheless has been continuing growth in spending on refurbishing their homes to reflect their lifestyles. We believe this will continue to support the growth of our popular lifestyle conscious products, and lead to another year of substantial record growth in 2012 in line with our earlier forecasts."

About Nova LifeStyle, Inc.

Nova LifeStyle, Inc., a U.S. company headquartered in California, is a fast growing, innovative designer and manufacturer of modern LifeStyle furniture, primarily sofas, dining rooms, cabinets and bedrooms in matching collections. Nova's products are made in the U.S., Asia and its state of the art factory completed in 2011 in Dongguan, China 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 and upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe and elsewhere in the world. 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.

 
 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
 
    Six Months Ended June 30,     Three Months Ended June 30,  
    2012     2011     2012     2011  
    (Unaudited)     (Unaudited)  
                                 
Net Sales
(Including sales to related party of $0 and $625,582 during the six months ended June 30, 2012 and 2011; and $0 and $261,180 during the three months ended June 30, 2012 and 2011, respectively)
  $ 27,146,315     $ 14,892,220     $ 16,147,061     $ 9,259,430  
                                 
Cost of Sales     20,320,386       10,650,433       12,331,407       6,806,804  
                                 
Gross Profit     6,825,929       4,241,787       3,815,654       2,452,626  
                                 
Operating Expenses                                
  Selling expenses     1,354,553       795,109       664,646       574,633  
  General and administrative expenses     2,360,913       1,416,998       1,309,698       1,090,445  
  Loss on disposal of plant, property and equipment     123,775       --       --       --  
                                 
Total Operating Expenses     3,839,241       2,212,107       1,974,344       1,665,078  
                                 
Income From Operations     2,986,688       2,029,680       1,841,310       787,548  
                                 
Other Income (Expenses)                                
  Non-operating income (expense)     (23,039 )     10,474       (25,338 )     5,512  
  Foreign exchange transaction gain (loss)     23,975       (60,729 )     15,663       (37,531 )
  Financial expense     (46,898 )     (16,322 )     (36,086 )     (6,933 )
                                 
Total Other Expenses, Net     (45,962 )     (66,577 )     (45,761 )     (38,952 )
                                 
Income Before Income Tax     2,940,726       1,963,103       1,795,549       748,596  
                                 
Income Tax Expense     537,104       378,035       370,589       169,070  
                                 
Net Income     2,403,622       1,585,068       1,424,960       579,526  
                                 
Other Comprehensive Income                                
  Foreign currency translation     (49,085 )     235,985       (61,930 )     131,511  
                                 
Comprehensive Income   $ 2,354,537     $ 1,821,053     $ 1,363,030     $ 711,037  
                                 
Basic weighted average shares outstanding     18,431,799       11,788,314       18,486,567       11,952,747  
Diluted weighted average shares outstanding     18,589,410       11,788,314       18,491,138       11,952,747  
                                 
Basic net earnings per share   $ 0.13     $ 0.13     $ 0.08     $ 0.05  
Diluted net earnings per share   $ 0.13     $ 0.13     $ 0.08     $ 0.05  
                                 
                                 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011  
   
    June 30,     December 31,  
    2012     2011  
    (Unaudited)        
Liabilities and Stockholders' Equity                
                 
Current Liabilities                
  Accounts payable   $ 3,339,981     $ 6,758,058  
  Line of credit     3,495,140       --  
  Advance from customers     90,755       91,021  
  Accrued liabilities and other payables     825,303       834,128  
  Taxes payable     426,620       198,984  
                 
Total Current Liabilities     8,177,799       7,882,191  
                 
Noncurrent Liabilities                
  Deferred rent payable     48,792       58,949  
  Income tax payable     4,215,859       4,016,266  
                 
Total Noncurrent Liabilities     4,264,651       4,075,215  
                 
Total Liabilities     12,442,450       11,957,406  
                 
Contingencies and Commitments                
                 
Stockholders' Equity                
  Common stock, $0.001 par value; 75,000,000 shares authorized, 18,486,567 and 17,898,267 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively     18,487       17,898  
  Additional paid-in capital     18,970,395       17,074,535  
  Subscription receivable     (1,950,000 )     (1,950,000 )
  Statutory reserves     6,241       6,241  
  Accumulated other comprehensive income     2,089,889       2,138,974  
  Retained earnings     7,976,058       5,572,436  
                 
Total Stockholders' Equity     27,111,070       22,860,084  
                 
Total Liabilities and Stockholders' Equity   $ 39,553,520     $ 34,817,490  
                 
                 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
         
    June 30,   December 31,
    2012   2011
    (Unaudited)    
Assets            
             
Current Assets            
  Cash and cash equivalents   $ 2,136,562   $ 2,505,179
  Accounts receivable, net     22,162,058     18,974,612
  Accounts receivable - related party     --     28,289
  Due from factor     --     203,351
  Advance to suppliers     1,123,472     349,767
  Inventories     2,325,080     1,848,081
  Prepaid expenses and other receivable     302,468     113,853
  Deferred tax asset     156,514     156,974
             
Total Current Assets     28,206,154     24,180,106
             
Noncurrent Assets            
  Heritage and cultural assets     128,199     128,687
  Plant, property and equipment, net     8,668,266     8,721,186
  Construction in progress     978,224     91,466
  Construction deposit     --     634,830
  Goodwill     218,606     218,606
  Intangible assets, net     1,235,900     724,465
  Deferred tax asset, net     118,171     118,144
             
Total Noncurrent Assets     11,347,366     10,637,384
             
Total Assets   $ 39,553,520   $ 34,817,490
             
             

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