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China Linen Textile Industry, Ltd. Announces Record Third Quarter 2010 Financial Results and Raises Full Year Guidance on Sales and EPS
Nov. 29, 2010 (PR Newswire) --

LANXI COUNTY, China, Nov. 29, 2010 /PRNewswire-Asia-FirstCall/ -- China Linen Textile Industry, Ltd. (OTC Bulletin Board: CTXIF) ("China Linen" or the "Company"), one of China's leading linen fabric and yarn producers, marketers and exporters, today announced record third quarter 2010 financial results.

Q3 2010 revenue increased 109.3% YOY to 14.0 million.
Q3 2010 net income increased 74.9% YOY to $2.8 million.
Q3 2010 EPS of $0.14 vs. $0.08 for the same period in 2009.
Raises full year 2010 guidance on revenues from $38.1 million to $44.0 million, maintains net income guidance of $9.3 million, raises EPS guidance from $0.39 to $0.46 based on 20,215,003 weighted average number of shares outstanding.

In the third quarter, the Company announced new independent director on August 30; announced Jodie Wehner as Chief Financial Officer on September 1; and signed contracts with three new customers in India and Turkey to supply 650 tons of linen yarn.

SUMMARY FINANCIALS

Third Quarter 2010 Results (unaudited)

Q3 2010
Q3 2009
CHANGE
Revenues
$14.0 million
$6.7 million
+109.3%
Gross Profit
$4.4 million
$2.1 million
+114.9%
Net Income
$2.8 million
$1.6 million
+74.9%
EPS (Diluted)
$0.14
$0.08
+74.1%


Nine Months 2010 Results (unaudited)

Nine-month 2010
Nine-month 2009
CHANGE
Revenues
$31.6 million
$20.6 million
+53.7%
Gross Profit
$9.8 million
$5.7 million
+72.2%
Net Income
$6.9 million
$4.3 million
+59.6%
EPS (Diluted)
$0.34
$0.21
+58.9%


Third Quarter Ended September 30, 2010 Financial Results

Revenue for the third quarter of 2010 increased 109.3% to $14.0 million, compared to $6.7 million for the third quarter of 2009. Growth was driven by strong market demand, increased market and sales efforts, increased production capacity and higher average selling price. Sales of linen fabric sales increased 110.9% year-over-year to $12.5 million, which represented 89.0% of sales for the period. Sales of linen yarn increased significantly from $0.2 million a year ago to $1.5 million in the third quarter. Sales from new customers contributed to approximately 45% of total revenue in the third quarter of 2010.

Gross profit for the third quarter of 2010 was $4.4 million, a 114.9% increase from $2.1 million in the third quarter of 2009. Gross margin was 31.5% compared to 30.7% in the third quarter of 2009.

Operating expenses for the third quarter of 2010 were approximately $0.7 million, compared to $0.2 million for the same period a year ago. The increase was primarily due to increased selling expenses and increased expenses in connection with its public company compliance efforts. Operating income for the third quarter of 2010 increased 98.2% to $3.7 million compared to operating income of $1.9 million in the third quarter of 2009.

Net income for the third quarter of 2010 increased 74.9% to $2.8 million, compared to $1.6 million for the third quarter of 2009. Diluted earnings per share increased 74.1% to $0.14 compared to $0.08 for the third quarter of 2009, based upon 20.2 million and 20.1 million weighted average number of shares outstanding, respectively.

"We are pleased to report record revenue and earnings for the third quarter of 2010, which were a direct result of our expanded sales efforts for our broad line of linen fabrics, increased linen yarn distribution channels, and our fixed asset lease agreement with Lanxi Tianxianfang Linen Company, Ltd. which significantly expanded our production capacity," stated Mr. Gao Ren, Chairman and President of China Linen. "Our recent acquisition of Lanxi Tianxianfang is an important milestone in our goal to become a vertically integrated producer and the benefits of this relationship were evidenced in our recent operating and financial results to further improve our financial and operational performance."

Nine Months Ended September 30, 2010 Financial Results

For the nine months ended September 30, 2010, revenue increased approximately 53.7% to $31.6 million compared to the same period in 2009, primarily resulting from a 57.5% increase in sales of linen fabric, which represented 94.8% of sales during the period. Gross profit was approximately $9.8 million for the first nine months of 2010, representing an increase of 72.2% from the first nine months of 2009. Gross margins improved 335 basis points to 31.1% for the first nine months of 2010 compared to the year ago period as a result of product mix, price increases and the Company's ability to effectively manage production costs.

Income from operations was $8.1 million for the first nine months of 2010, representing an increase of 60.0% over the first nine months of 2009. Operating margins were 25.8% for the first nine months of 2010, compared to 24.7% for the first nine months of 2009.

Net income was $6.9 million for the nine months ended September 30, 2010, an increase of approximately 59.6% from the same period in 2009. Fully diluted earnings per share increased 58.9% to $0.34 for the first nine months of 2010, compared to $0.21 for the first nine months of 2009, based up on 20.2 million and 20.1 million weighted average number of shares outstanding, respectively.

Balance Sheet and Cash Flow

Cash and cash equivalents totaled $4.4 million on September 30, 2010, compared to $2.3 million on December 31, 2009. Accounts receivable balance was approximately $15.6 million on September 30, 2010, versus approximately $8.8 million on December 31, 2009. Days sales outstanding (DSO) for the first nine months of 2010 were at 114 days, compared to 119 days for the same period in 2009. The Company had a current ratio of 2.4 to 1 and stockholders' equity of $28.9 million, with total assets of $45.6 million versus total liabilities of $16.7 million on September 30, 2010.

For the first nine months of 2010, the Company generated $2.5 million in cash from operations versus $2.3 million for the same period in 2009.

Fiscal 2010 Guidance

Based on the strong results recorded in the first nine months of 2010, Management raises full year guidance of sales from $38.1 million to $44.0 million, maintains net income guidance of $9.3 million and raises EPS guidance from $0.39 to $0.46 based on 20,215,003 weighted average number of shares outstanding.

Mr. Gao Ren, Chairman and President of China Linen, stated: "China Linen's continued international and domestic market expansion is anticipated to yield additional customers and orders, which will drive incremental growth and support our efforts to further penetrate the existing customer base. We expanded our linen yarn production capacity by approximate 40% and linen fabric production capacity by 26% through the additional of Lanxi Tianxianfang, which provides the foundation to meet our 2011 growth objectives."

Conference Call Information

China Linen's management will hold an earnings conference all at 4:30 p.m. Eastern Time on November 29, 2010. Interested parties may access the call by dialing 1-877-941-4774 from within the United States, or 1-480-629-9760 if calling internationally. The conference ID is 4386918. It is advisable to dial in approximately 5-10 minutes prior to the start of the call. A replay will be available through December 6, 2010 and can be accessed by dialing [phone] (U.S.), [phone] (Int'l), passcode 4386918.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link, http://viavid.net/dce.aspx?sid=00007E7A, or at ViaVid's website at http://www.viavid.net, where the webcast can be accessed through December 6, 2011.

About China Linen Textile Industry, Ltd.

China Linen Textile Industry, Ltd. (http://www.chinalinen.cc/) is principally engaged in the production and sale of linen yarn and various types of linen fabric. The Company is also involved in consultation and R&D related to linen technology and linen products. The Company carries on all of its business activities through its subsidiary, Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd. ("Lanxi Sunrise"), established in June 2002 and located in Lanxi County, the "Homeland of Flax in China," near Harbin City in China. Lanxi Sunrise has one yarn-spinning factory, one bleaching factory and two fabric weaving factories in its 35,120 square meters of building area with a staff of 1,400 and 430 sets of world-class, advanced production machinery. Annual production capacity totals approximately 2,220 tons with 50 different types of yarn and 10 million meters of fabric with 110 types. Approximately 50 percent of its products are exported to more than 10 countries.

Forward-looking Statements

The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, including statements related to expected market trends and the Company's performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

For further information, contact:

China Linen Textile Industry, Ltd.
Ms. Jodie Zheng Wehner, CFO
Tel: 001-310-890-8048
Email: [e-mail]
Mr. Xiao Weixing, IR Manager
Tel: [phone]
Email: [e-mail]


HC International, Inc.
Scott Powell, Vice-President
Tel: [phone]
Email: [e-mail]
Web: www.hcinternational.net


CHINA LINEN TEXTILE INDUSTRY, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2010 and December 31, 2009 (Stated in US Dollars)

September 30,

December 31,

2010

2009
ASSETS
Unaudited

Audited
Current assets
$

$
Cash and cash equivalents
4,357,753

2,320,656
Bank checks and commercial paper
-

1,921,610
Accounts receivable, net
15,566,624

8,762,516
Inventory
7,528,371

4,862,855
Prepaid expenses
2,883,591

2,183,219

Other receivables
354,351

100,165
Due from related parties
734,582

2,576,579
Governmental subsidy receivable
2,211,631

1,449,331
Deferred tax assets
214,593

228,794
Total current assets
33,851,496

24,405,725
Non-current assets



Property, plant and equipment, net
8,916,696

9,195,907
Land use right, net
408,673

408,134
Governmental subsidy receivable, non-current
2,173,599

1,882,593
Deferred tax assets, non-current
233,969

238,600
TOTAL ASSETS
45,584,433

36,130,959




LIABILITIES AND STOCKHOLDERS' EQUITY



Current Liabilities



Bank loans
3,583,106

4,048,583
Accounts payable
4,646,420

2,565,188
Accrued expenses and other payables
1,359,534

1,101,571
Taxes payable
2,710,897

3,729,506
Deferred revenue
1,303,776

423,153
Deferred governmental subsidy
90,577

88,995
Due to related parties
-

74,888
Deferred tax liabilities
552,908

362,333
Total current liabilities
14,247,218

12,394,217
Non-current liabilities



Deferred governmental subsidy, non-current
1,928,112

1,792,482
Deferred tax liabilities, non-current
543,400

470,648
TOTAL LIABILITIES
16,718,730

14,657,347




STOCKHOLDER'S EQUITY



Common stock $0.002 par value, 500,000,000 shares authorized; 20,215,003 shares and 20,200,003 shares issued outstanding as of September 30, 2010 and December 31, 2009outstanding as of September 30, 2010 and December 31, 2009
42,304

42,274
Additional paid-in capital
3,119,586

3,093,816
Statutory reserves
1,593,559

1,593,559
Retained earnings
21,926,402

15,060,004
Accumulated other comprehensive income
2,183,852

1,683,959
TOTAL STOCKHOLDER'S EQUITY
28,865,703

21,473,612
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
45,584,433

36,130,959
The accompanying notes are an integral part of these condensed consolidated financial statements.


CHINA LINEN TEXTILE INDUSTRY, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the nine months ended September 30, 2010 and 2009 (Stated in US Dollars)

Three months ended

Nine months ended

September 30,
March 31

September 30,


2010

2009

2010

2009
Revenues

$

$

$

$
Net sales

14,017,497

6,697,133

31,616,522

20,570,248
Costs of goods sold

9,600,447

4,641,996

21,772,776

14,854,716
Gross profit

4,417,050

2,055,137

9,843,746

5,715,532
Operating expenses








Selling expenses

159,127

101,152

314,719

284,103
General and administrative expenses

578,828

98,035

1,383,809

341,228
Total operating expenses

737,955

199,187

1,698,528

625,331
Operating income

3,679,095

1,855,950

8,145,218

5,090,201
Other income (expense)








Interest income

64,671

62,760

161,689

188,220
Interest expense

(155,748)

(70,612)

(314,410)

(242,497)
Government subsidies

366,248

311,101

1,115,895

636,517
Other income (expense)

22,238

85,636

66,755

(4,723)
Total other income

297,409

388,885

1,029,929

557,517
Income before tax

3,976,504

2,244,835

9,175,147

5,667,718
Income tax

1,135,295

620,493

2,308,749

1,364,814
Net income

2,841,209

1,624,342

6,866,398

4,302,904
Other comprehensive income








Effects of foreign currency conversion

394,953

(50,376)

499,893

(15,239)
Comprehensive income

3,236,162

1,573,966

7,366,291

4,287,665









Basic and diluted earnings per share

0.141

0.081

0.340

0.214



CHINA LINEN TEXTILE INDUSTRY, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2010 and 2009 (Stated in US Dollars)

Nine months ended

September 30,


2010

2009
Cash Flows from Operating Activities



Net income
$ 6,866,398

$ 4,302,904
Adjustments to reconcile net income to net cash



provided by operating activities:



Depreciation
445,214

331,481
Amortization
6,259

6,576
Deferred income taxes
271,182

(155,155)
Deferred government subsidy
103,538

(89,633)
Changes in:



Bank checks and commercial paper
1,920,220

(906,088)
Accounts receivable
(6,540,282)

(82,242)
Inventory
(2,538,376)

2,891,632
Prepaid expenses
(653,548)

(3,499,187)
Other receivables
(248,124)

(461,884)
Governmental subsidy, net
(979,609)

2,201,476
Accounts payable
2,002,735

1,074,871
Accrued expenses and other payables
234,065

393,140
Taxes payable
(1,062,960)

(4,182,968)
Deferred revenue
858,322

650,907
Due to/from related parties
1,778,049

9,965
Net cash provided by operating activities
2,463,083

$2,305,795




Cash Flows from Investing Activities



Purchase of property, plant and equipment
$ (10,173)

$ (148,865)
Net cash used in investing activities
$ (10,173)

$ (148,865)



CHINA LINEN TEXTILE INDUSTRY, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2010 and 2009 (Stated in US Dollars)

Nine months ended

September 30,

2010

2009
Cash Flows from Financing Activities



Proceeds from bank loans
$ 3,520,920

$ 4,031,787
Repayments of bank loans
(4,045,655)

(4,031,787)
Proceeds from paid-in capital
25,800

-
Decrease in loans from local government
-

(294,436)
Net cash used in financing activities
$ (498,935)

$ (294,436)




Increase in cash
1,953,975

1,862,494
Effects of foreign currency conversion on cash
83,122

1,353
Cash at beginning of period
2,320,656

10,674
Cash at end of period
$ 4,357,753

$ 1,874,521





Supplemental Disclosures of Cash Flow Information



Cash paid during the period for:



Interest
$ 314,410

$ 242,297




Income taxes
$ 2,308,749

$ 2,228,371



SOURCE China Linen Textile Industry, Ltd.


Source: PR Newswire (November 29, 2010 - 7:30 AM EST)

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