Third quarter 2009 Results

For the third quarter of 2009, revenue increased 48.2% to a record high of $24.8 million compared to $16.7 million for the same period in 2008, benefiting from higher sales of system contracting projects and product sales during the period. The Company recognized revenues from 205 total solution, product sales and maintenance contracts for the three months ended September 30, 2009 as compared to 163 contracts for the three months ended September 30, 2008.

Gross profit for the third quarter of 2009 increased by 41.9%, or $4.1 million, to $14.0 million, from $9.9 million in the same period of prior year. Gross margin for the third quarter of 2009 was 56.4%, compared to 58.9% for the same period of 2008, primarily due to the decreased gross margin of the product sales.

Operating income grew 34.4% to $8.5 million, from $6.1 million for the same period last year, driven by the strong revenue growth. Operating margin in the third quarter of 2009 was 34.4% versus 36.6% a year ago due to the lower gross margin during this period.

Operating expenses were $5.5 million for the third quarter of 2009, compared to $3.7 million for the same period of 2008. As a percentage of the total revenue, operating expense was 22.1%, decreased from 22.3% a year ago.

Tax expense was $1.3 million for an effective tax rate of 15.0%, as compared to $6,736 tax credit a year ago.

Net income was $7.6 million, an increase of $1.1 million, or 17.0%, as compared to $6.5 million for the same period of 2008. As a result, fully diluted EPS increased 16.5% to $0.27 in the third quarter of 2009, versus $0.23 in the third quarter of the prior year.

Mr. Brian Lin, Chief Executive Office of China Fire commented, "I am satisfied with our third quarter performance, as we achieved record revenue and solid profits. During the quarter, we have secured contracts from iron and steel companies, power plants, and petrochemical plants. We have also succeeded in significantly growing our international markets with notable wins in the fast-emerging power generation market in India. While our backlog at the end of the third quarter was $75 million, we continue to be excited by our growth opportunities and by our ability to command firm pricing for our total solutions. We believe that our technical strengths and leading market position will enable us to seize more growth opportunities from the world's two most dynamic economies -- China and India."

Liquidity and Capital Resources

As of September 30, 2009, the Company had cash of $28.5 million, working capital of $84.1 million, and zero debt. During the third quarter, our accounts receivable increased by $4.1 million to $28.3 million, our DSOs increased slightly to 130 days, versus 128 days in the previous quarter.

Financial Outlook for 2009

For the full year 2009, the Company has reaffirmed its revenue guidance of $88 million to $95 million and its projected net income between $28.3 million and $29.7 million, or $1.00 to $1.05 per diluted share.

Mr. Lin commented, "As a component of China's revitalization scheme for the iron and steel industry, the government, in its efforts to control overcapacity, recently held back on further building new production capacity. However, at the same time, the revitalization scheme also encourages our tier- 1 iron and steel customers to invest in technology innovation and upgrade, and to build new plants for high-end products. We are increasingly excited about the large contract opportunities in the market of retrofitting existing iron and steel production capacities, with the further enforcement of new Fire Protection Law and the mandatory national fire codes for iron & steel plants in China. Additionally, we anticipate continued government support to substantially expand the nation's power generation and transmission capacity and sustained momentum in the transportation and petrochemical verticals. We are also excited about the fast-growing industrialization process in India and other developing economies throughout Asia. As such, we remain focused on executing the strategies that we have consistently outlined throughout 2009.

"We remain bullish about our growth prospects, and we are confident about our strategy and our technical expertise in fire safety. We intend to continue growing our leading brand, distribution, customer base, total solution offering, and competitive advantages in the rapidly growing industrial fire protection industry."

Conference Call

The Company will hold a conference call to discuss the financial results at 8:00 a.m. ET today, November 9, 2009. The Company invites you to join the call by dialing 1-719-325-2322.