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Nova LifeStyle Reports Fourth Quarter and Full Year 2015 Financial Results

LOS ANGELES, March 28, 2016 (GLOBE NEWSWIRE) -- Nova LifeStyle, Inc. (NASDAQ:NVFY), a U.S. based fast-growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, today announced financial results for the fourth quarter and twelve months ended December 31, 2015.

Fourth Quarter and Full Year 2015 Financial Highlights:

  • For the twelve-month period ended December 31, 2015, Net Sales were $108.8 million, an increase of 10.3% compared to the prior year period. Sales growth was driven primarily by a 11% increase in sales volume along with a 2% decrease in average selling prices.
  • Fourth quarter Net Sales were $28.6 million compared to $29.0 in the prior year period.
  • For the full year 2015, gross profit was $18.4 million, a decrease of 5.2% versus the prior year period. Gross profit for the fourth quarter was $4.8 million, a decrease of 8.0% from the prior year period.
  • Fourth quarter Gross Margin was 15%, compared to 23% in the prior year period while full year 2015 Gross Margin was 16.9%, compared to 19.6% in the prior year period. Fourth quarter sales mix was more heavily weighted to lower price products which also yield lower margins for the Company.
  • Gross Profit and Gross Margin both also declined due to increased costs associated with products purchased from third parties. In addition, Nova LifeStyle reduced selling prices on certain items sold to a limited number of large accounts during 2015, which the Company believes will ultimately benefit its growth in the future while allowing it to sell additional product into core accounts while eventually gaining margin expansion as it reaches critical mass with those customers.
  • Net Income was $0.7 million, or $0.03 per diluted share based on 22.8 million shares outstanding in the fourth quarter of 2015, compared to net income of $1.8 million or $0.09 per diluted share based on 20.4 million shares outstanding in the prior year period.
  • For the full year 2015, Net Income was $2.2 million, or $0.10 per diluted share based on 22.8 million shares outstanding, compared to net income of $8.5 million or $0.42 per diluted share based on 20.4 million shares outstanding in the prior year period.

Management Commentary
Jeffrey Wong, Chief Executive Officer of Nova LifeStyle, stated, "Our 2015 results were highlighted by top line growth of 10% year over year, largely driven by our continued expansion in North America and China. North American sales increased 17% during the period, showing that our expanded marketing efforts to the U.S. and Canadian markets are bearing fruit. This also compares very favorably with North American industry growth of 3.8% last year.1 In China we grew our sales 11% as our relationship with IKEA continues to expand. In addition, we expect recently-announced partnerships, such as Vanke, one of the leading real estate developers in China, to help drive continued sales growth in 2016 and beyond. Although European sales were relatively flat year over year we continue to believe that customers in those markets have an appetite for our new modern home furnishing solutions that encapsulate a changing contemporary lifestyle. As those economies begin to rebound we expect to see increased sales activity.”

Mr. Wong continued, “Last quarter we noted that our cost of goods was elevated due to increased seasonal orders fulfilled using third party manufacturers and this dynamic persisted in the fourth quarter. We feel it is vital to make sure we provide our customers with the highest quality products in a timely manner. In order to maintain this level of service, we are sometimes forced to absorb higher third party costs. Over the long run we are confident that this strategy cements our relationship with our clients and is the right course of action. We are working to expand our supplier base which we feel will lead to more stability in our supply chain moving forward. Additionally, as we pursue large, “national account sized” customers, we may choose to offer some flexibility on price in order to gain new customers. During the fourth quarter we made a small number of such concessions which we believe will benefit our business in the long run.”

Ms. Tawny Lam, President of Nova LifeStyle, stated, “2015 featured a number of highlights for Nova LifeStyle. We participated in several of the leading industry trade shows, such as the Las Vegas Market events along with the High Point Market. We continued to expand our online commerce presence and announced new partnerships with leading firms such as Vanke and I-Kongjian. An additional highlight of the year was that Nova LifeStyle won the Outstanding Import & Export Enterprise Award from The Hong Kong Chinese Importers’ & Exporters’ Association (“HKCIEA” or the “Association”) on September 14, 2015 following the Company’s participation at The 36th Edition of the China International Furniture Fair (Shanghai), from September 8-12, 2015. In closing, I would like to thank all of our shareholders for their trust in our company and I would also like to thank all of our employees for their hard work and dedication.”

1 https://ycharts.com/indicators/us_furniture_and_home_furnishings_store_sales

Operational Overview

Product Category
Nova LifeStyle’s largest selling product categories in the twelve months ended December 31, 2015 and 2014 were sofas, cabinets and dining tables, which accounted for approximately 30%, 15% and 16% of sales, respectively, for the twelve months ended December 31, 2015, versus 34%,16% and 16% of sales in the prior year period.

In order to drive growth, the Company is focused on the adoption of new image standards along with continued expansion of its product lines. The Company intends to enrich its product lines to include a bedroom series, which would include beds, bed side tables, mattresses (which could be imported or purchased in China) and bedding sets including bed sheets, pillowcases, quilt covers, and other items (which can be purchased within China).

Geographic Breakdown

North America
Sales to North America were $75.2 million in the twelve months ended December 31, 2015, an increase of 17% from $64.4 million in the same period of 2014, driven by a continuation of our increased marketing efforts in the U.S. markets. As a percentage of total revenue, North American sales remain the largest for Nova LifeStyle at 69%.

China
In China, overall sales increased by 11% to $19.0 million in the twelve months ended December 31, 2015, as compared to $17.0 million in the same period of 2014, driven by increased sales from our subsidiary, Ding Nuo, to IKEA.

Europe
Sales to Europe were $10.6 million in the twelve months ended December 31, 2015, a decrease of 7% from $11.4 million in the same period of 2014 as a result of the continued softness in European economies.

Geographical distribution of sales is set out as follows:

(US$ in millions)For twelve months ended December 31, For three months ended December 31,
20152014 20152014
Sales% of TotalSales% of Total Sales% of TotalSales% of Total
China*$ 19.0 17%$ 17.0 17% $ 5.5 19%$ 4.8 17%
North America 75.2 69% 64.4 65% 18.0 63% 120.2 70%
Asia** 2.7 2% 4.4 5% 0.6 2% 0.3 1%
Europe 10.6 10% 11.4 12% 3.7 13% 3.2 11%
Australia 0.5 1% 0.7 1% 0.1 1% 0.4 1%
Hong Kong 0.7 1% 0.7 1% 0.6 2% 0.0 0%
Other countries 0.3 0% 0.1 0% 0.2 1% - NA
$ 108.9 100%$ 98.7 100% $ 28.6 100%$ 25.9 100%
* excluding Hong Kong
** excluding China

Notable Achievements and Highlights During 2015

  • January 2015: Presented at the Winter 2015 Las Vegas Market trade show. The Las Vegas Market is an international furnishings showcase that combines style, inspiration and productivity in an unrivaled, world-class destination.
  • April 2015: Announced the successful development of a new, health-oriented, product line called Smart Health Furniture, that offers the ability to monitor, record and deliver user data to key medical care providers.
  • June 2015: Launched First-of-Its-Kind "Last Mile" Furniture Delivery and Installation Service called ezHome.
  • August 2015: Presented at the Summer 2015 Las Vegas Market trade show. The Las Vegas Market is an international furnishings showcase that combines style, inspiration and productivity in an unrivaled, world-class destination.
  • September 2015: Won the Outstanding Import & Export Enterprise Award from The Hong Kong Chinese Importers’ & Exporters’ Association (“HKCIEA” or the “Association”) on September 14, 2015 following the Company’s participation at The 36th Edition of the China International Furniture Fair (Shanghai), from September 8-12, 2015.
  • October 2015: Participated in the High Point Market trade show in High Point, NC. The High Point Market is the largest furnishings industry trade show in the world, bringing more than 75,000 people every six months.
  • December 2015: Signed a strategic alliance agreement with (China) Shanxi Wanqing Senior Care Service, Group (“Shanxi Wanqing”), a senior care service, senior care home and hotel development company, to operate as its exclusive supplier for furniture design and manufacturing.


Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents were $1.0 million at December 31, 2015, as compared to $1.2 million as of December 31, 2014.
  • Working capital at December 31, 2015 was $48.6 million, as compared to $34.5 million at December 31, 2014.

The following is a summary of cash provided by or used in each of the indicated types of activities during the twelve months ended December 31, 2015 and 2014:

2015 2014
Cash (used in) provided by:
Operating activities $(4,229,308) $(6,455,730)
Investing activities (2,473,664) (4,137,725)
Financing activities 6,452,072 9,510,373

Net cash used in operating activities was $4.2 million in the twelve months ended December 30, 2015, a decrease of cash outflow of $2.3 million from $6.5 million of cash used in operating activities in the same period of 2014.

Conference Call Details
Date / Time:Monday, March 28, 2016 at 11:00 a.m. ET
Participant Dial-In Numbers
(United States):877-704-4209
(International):201-689-8024
(China):+86 40-0120-2840

Webcast
To listen to the live webcast, please go to www.NovaLifeStyle.com and click on the conference call link, or click: Nova Lifestyle Fourth Quarter and Full Year 2015 Webcast. This webcast will be archived and accessible through the Company’s website for approximately 30 days following the call.

About Nova LifeStyle
Nova LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company headquartered in California, is a fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture; primarily sofas, dining rooms, cabinets, office furniture and related components, bedrooms, and various accessories in matching collections. Nova's products are made in the US, Europe, and Asia and include LifeStyle brands such as Diamond Sofa, Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow International. Nova's products feature urban contemporary styles that integrate comfort and functionality incorporating 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 our website at www.NovaLifeStyle.com or download the NVFY IRapp from the investor page.

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
FOR THE TWELVE AND THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014
Years Ended December 31 Three Months Ended December 31
2015 2014 2015 2014
(Audited) (Audited) (Unaudited) (Unaudited)
Net Sales $108,820,112 $98,711,275 $28,617,544 $29,002,293
Cost of Sales 90,430,560 79,319,418 23,763,946 23,726,425
Gross Profit 18,389,552 19,391,857 4,853,598 5,275,868
Operating Expenses
Selling expenses 6,161,294 5,477,132 2,273,585 2,678,803
General and administrative expenses 8,678,402 7,823,767 1,883,117 2,024,572
Goodwill impairment-- 808,518 -- --
Loss on disposal fixed assets-- 31,727 -- 2,764
Total Operating Expenses 14,839,696 14,141,144 4,156,702 4,706,139
Income From Operations 3,549,856 5,250,713 696,896 569,729
Other Income (Expenses)
Non-operating income, net 325,701 241,189 220,618 76,909
Foreign exchange transaction gain 93,797 48,183 17,820 48,183
Change in fair value of warrant liability (767,096) 4,194,847 -- 1,353,670
Interest expense (387,477) (158,336) (106,320) (57,419)
Financial expense (62,953) (41,212) (17,198) 15,111
Total Other Income (Expenses), Net (798,028) 4,284,671 114,920 1,436,454
Income Before Income Tax 2,751,828 9,535,384 811,816 2,006,183
Income Tax Expense 551,586 980,736 127,313 228,425
Net Income 2,200,242 8,554,648 684,503 1,777,758
Other Comprehensive Income
Foreign currency translation (1,004,633) (27,843) (349,463) 111,893
Comprehensive Income $1,195,609 $8,526,805 $335,040 $1,889,651
Basic weighted average shares outstanding 22,825,652 20,381,934 22,594,017 20,257,955
Diluted weighted average shares outstanding 22,825,652 20,470,258 22,594,017 20,372,292
Basic net earnings per share $0.10 $0.42 $0.03 $0.09
Diluted net earnings per share $0.10 $0.42 $0.03 $0.09


NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2014
2015 2014
Assets
Current Assets
Cash and cash equivalents$988,029 $1,244,308
Accounts receivable, net 50,451,665 42,971,510
Advance to suppliers 7,958,870 8,104,312
Inventories 5,254,029 3,612,868
Prepaid expenses and other receivables 1,180,452 641,208
Deferred tax asset-- 118,866
Total Current Assets 65,833,045 56,693,072
Noncurrent Assets
Heritage and cultural assets 124,868 132,513
Plant, property and equipment, net 15,201,395 14,377,909
Construction in progress-- 1,378,860
Lease deposit 94,235 96,096
Deposits for equipment and factory construction 143,758 1,264,551
Goodwill 218,606 218,606
Intangible assets, net 8,062,649 6,493,726
Deferred tax asset 69,451 --
Total Noncurrent Assets 23,914,962 23,962,261
Total Assets $89,748,007 $80,655,333
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable$9,822,857 $10,454,485
Line of credit 4,604,560 7,592,879
Advance from customers 187,359 123,673
Accrued liabilities and other payables 2,584,622 2,470,284
Warrant derivative liability-- 1,465,019
Taxes payable 5,773 61,769
Total Current Liabilities 17,205,171 22,168,109
Noncurrent Liabilities
Line of credit 5,659,357 --
Deferred rent payable 89,904 85,077
Deferred tax liability-- 12,199
Income tax payable 6,801,893 6,607,739
Total Noncurrent Liabilities 12,551,154 6,705,015
Total Liabilities 29,756,325 28,873,124
Contingencies and Commitments
Stockholders' Equity
Common stock, $0.001 par value; 75,000,000 shares authorized,
24,254,160 and 20,897,316 shares issued and outstanding 24,254 20,897
as of December 31, 2015 and 2014, respectively
Additional paid-in capital 31,761,983 24,751,476
Statutory reserves 6,241 6,241
Accumulated other comprehensive income 1,570,534 2,575,167
Retained earnings 26,628,670 24,428,428
Total Stockholders' Equity 59,991,682 51,782,209
Total Liabilities and Stockholders' Equity$89,748,007 $80,655,333


NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(AUDITED)
2015 2014
Cash Flows From Operating Activities
Net Income$2,200,242 $8,554,648
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation and amortization 1,860,598 1,700,758
Changes in deferred tax 35,127 180,720
Stock compensation expense 1,377,328 663,317
Warrants expense-- 76,629
Change in fair value of warrant liability 767,096 (4,194,847)
Bad debt expenses 669,596 119,121
Goodwill impairment-- 808,518
Loss on disposal of fixed assets-- 31,727
Changes in operating assets and liabilities:
Accounts receivable (8,659,276) (15,066,077)
Advance to suppliers 137,262 (4,572,043)
Inventories (1,798,077) (266,023)
Other current assets (922,702) 131,343
Accounts payable (382,438) 3,508,782
Advance from customers 68,975 80,602
Accrued expenses and other payables (5,036) 998,188
Deferred rent payable 10,149 11,149
Taxes payable 411,848 777,758
Net Cash Used in Operating Activities (4,229,308) (6,455,730)
Cash Flows From Investing Activities
Deposit on plant construction and equipment (80,604) (1,252,811)
Payment for land compensation fee and occupancy tax (951,003) --
Purchase of property and equipment (396,049) (1,617,961)
Cash received from disposition of fixed assets-- 11,998
Construction in progress (1,046,008) (1,278,951)
Net Cash Used in Investing Activities (2,473,664) (4,137,725)
Cash Flows From Financing Activities
Proceeds from line of credit and bank loan 38,908,577 30,612,098
Repayment to line of credit and bank loan (36,101,507) (30,439,566)
Proceeds from subscription receivable-- 750,000
Cash received from warrants exercised-- 468,841
Proceeds from equity financing, net of expenses of $355,000 3,645,002 8,119,000
Net Cash Provided by Financing Activities$6,452,072 $9,510,373
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(AUDITED)
2015 2014
Effect of Exchange Rate Changes on
Cash and Cash Equivalents$(5,379) $4,052
Net decrease in cash and cash equivalents (256,279) (1,079,030)
Cash and cash equivalents, beginning of period 1,244,308 2,323,338
Cash and cash equivalents, ending of period$988,029 $1,244,308
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Income tax payments$131,292 $21,493
Interest expense$388,325 $312,322
Supplemental Disclosure of Non-Cash Financing Activities
Construction in progress and deposits for equipment and factory construction transfer to fixed assets $2,406,995 $797,665
Construction in progress transfer to intangible assets$1,208,200 $ --
Issuance of common stock in exchange of surrender and termination of warrants$2,232,115 $ --

Company Contact: Investor Relations: The Equity Group Inc. In U.S. Adam Prior, Senior Vice President +1 (212) 836-9606 aprior@equityny.com In China Katherine Yao, Senior Associate +86-10-6587-6435 kyao@equityny.com

Source:Nova LifeStyle, Inc.