WUXI, China, March 31, 2015 /PRNewswire/ -- Cleantech Solutions International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a manufacturer of metal components and assemblies used in various clean technology and manufacturing industries and textile dyeing and finishing machines, today announced its financial results for the three months and year ended December 31, 2014.
"We recorded modest revenue growth in 2014, driven by our dyeing and finishing equipment business due to our marketing efforts and the effects of Chinese government's policies that are encouraging textile manufacturers to upgrade equipment with more environmentally friendly models. Net income was impacted by a $3.8 million impairment loss related to equipment held for sale and a $1.2 million reduction of previously recorded deferred tax assets related to that equipment. We generated positive cash flow from operations and closed the year with $7.8 million in cash and equivalents. We introduced new styles of dyeing machines and upgraded our facilities to serve customers in the oil and gas and petrochemical industries, allowing us to obtain several purchase orders that will contribute to our revenue growth in 2015," said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions.
Fourth Quarter 2014 Results
Revenue for the fourth quarter of 2014 decreased by 9.9% to $20.5 million, compared to $22.8 million for the same period of 2013.
The Company experienced lower sales of forged products to non-wind customers and dyeing and finishing equipment customers compared to the comparable quarter last year, when the Company generated record sales from these two segments:
Gross profit for the fourth quarter of 2014 decreased by 20.6% to $4.7 million, compared to $5.9 million for the same period in 2013. Gross margin was 22.9% during the fourth quarter of 2014 compared to 26.0% for the same period a year ago. The decline in gross margin for the 2014 fourth quarter was primarily attributable to (i) lower selling prices in our forged products and components segment, which was necessary to meet competition, and (ii) the relatively higher costs of revenue associated with the introduction of new models of dyeing and finishing equipment with an initial low production run resulting in fixed costs being allocated over a smaller number of units.
Operating expenses increased by 84.2% to $5.8 million, compared to $3.1 million in the comparable period last year. The increase was primarily due to a $3.8 million non-cash impairment loss related to electro-slag re-melted ("ESR") equipment in the fourth quarter of 2014, compared to a $2.6 million non-cash impairment loss on the same equipment in the same period last year. The Company does not expect any material impairment charges associated with the ESR equipment in the future. Selling, general and administrative expenses increased by 276.4%, primarily due to the recording of bad debt expense of $0.5 million in the fourth quarter of 2014, compared with a $0.6 million bad debt recovery in the fourth quarter of 2013 resulting from the collection of a previously reserved receivable.
Operating loss was $1.1 million, compared to operating income of $2.8 million in the same period of 2013. Operating margin was negative 5.2% compared to 12.2% in the same period of 2013.
Adjusted EBITDA, a non-GAAP measurement, which adds back to net income include the interest expense, income tax, depreciation and amortization and impairment loss on ESR equipment, was $5.0 million, compared to $7.3 million in the fourth quarter last year. The calculation of adjusted EBITDA is shown in a table following the financial statements.
Net loss for the fourth quarter of 2014 was $3.0 million, or $(0.79) per basic and diluted share, compared to net income of $2.1 million, or $0.60 per basic and diluted share, in the fourth quarter of 2013. Non-GAAP adjusted net income, which adds back to net income include the impairment loss on ESR equipment and a reduction in previously recorded deferred tax assets related to the ESR equipment, was $2.0 million, or $0.51 per basic and diluted share, compared with $4.7 million, or $1.34 per basic and diluted share, in the fourth quarter of 2013. The calculations of non-GAAP adjusted net income and earnings per share are shown in a table following the financial statements.
Full Year Results
For the year ended December 31, 2014, revenue increased by 5.3% to $76.0 million from $72.1 million in 2013. Gross profit was $17.7 million unchanged from last year. Gross margin in 2014 was 23.4%, compared to 24.5% in 2013. Operating income decreased 21.8% to $8.9 million from $11.4 million in 2013. Adjusted EBITDA, a non-GAAP measurement, was $21.4 million, compared to $20.9 million in 2013. Net income was $4.3 million, compared to $8.2 million in 2013. Net income per basic and diluted share was $1.15 compared to $2.55 in 2013. Non-GAAP adjusted net income was $9.3 million, compared to $10.8 million in 2013. Non-GAAP adjusted earnings per basic and diluted share was $2.50 compared to $3.35 in 2013. The calculations of adjusted EBITDA and non-GAAP adjusted net income and earnings per share are shown in a table following the financial statements.
Financial Condition
As of December 31, 2014, Cleantech Solutions held cash and cash equivalents of $7.8 million compared to $1.1 million at December 31, 2013. Accounts receivable were $20.3 million compared to $15.2 million at December 31, 2013. Inventories were $4.2 million compared to $4.7 million at December 31, 2013. Total current assets were $34.1 million as of December 31, 2014. The Company had $3.1 million in short-term bank loans payable at December 31, 2014, relatively unchanged from December 31, 2013. Stockholders' equity was $97.3 million at December 31, 2014.
In 2014, the Company generated $12.2 million in cash flow from operations and spent approximately $7.1 million in capital expenditures to expand production capabilities which included the acquisition of new machinery and molds to be used in the production process and the expansion of factory space and employee dormitory facilities, and for improvements to existing office facilities.
Recent Events
In January 2015, Cleantech Solutions' operating company, Wuxi Huayang Dyeing Machinery Co., Ltd. ("Huayang Dyeing"), a variable interest entity, received a purchase order worth RMB7.0 million ($1.1 million) for 12 units of its newly developed air-fluid, dual-use dyeing machine from a leading weaving and dyeing enterprise based in Shaoxing, China. The Company expects to begin delivering the equipment in May 2015.
Business Outlook
"We expect revenue growth to continue in 2015, driven primarily by sales of forged products and components to customers in the petroleum and chemical industries. We are pleased that after receiving the certifications needed to serve these markets in mid-2013, we now have several orders in hand that will generate meaningful revenue in 2015. We see room for additional growth as a number of our customers in the petroleum and chemical industries are benefiting from anticipated closer energy trade relations between Russia and China," said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. "We also expect a significant revenue contribution from our dyeing equipment segment as textile manufactures continue to upgrade equipment in an effort to comply with China's more aggressive pollution control requirements. We are hopeful our new air-fluid, dual-use dyeing machine will be well received at the upcoming Shanghai International Textile Industry Expo in June 2015."
Conference Call
Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Daylight Time on Tuesday, March 31, 2015 to discuss financial results for the fourth quarter and year ended December 31, 2014.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 346-8982. International callers should dial (412) 902-4272 and ask to join the Cleantech Solutions International call.
If you are unable to participate in the conference call at this time, a replay will be available through April 7, 2015 at 9:00 am EDT. To access the replay, dial (877) 344-7529 or (412) 317-0088 for international callers and enter pin code: 10062749.
Use of Non-GAAP Financial Measures
The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.
About Cleantech Solutions International
Cleantech Solutions is a manufacturer of metal components and assemblies, primarily used in clean technology and other industries and dyeing and finishing equipment for the textile industry and forged rolled rings and related products, and a supplier of fabricated products and machining services to a range of clean technology customers. The Company's website is www.cleantechsolutionsinternational.com. Any information on the Company's website or any other website is not a part of this press release.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein and in the conference call referred to in this press release as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website, including factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2014. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.
Company Contacts:
Cleantech Solutions International, Inc.
Adam Wasserman, CFO
E-mail: adamw@cleantechsolutionsinternational.com
Web: www.cleantechsolutionsinternational.com
Compass Investor Relations
Elaine Ketchmere, CFA
Email: eketchmere@compass-ir.com
+1-310-528-3031
Web: www.compassinvestorrelations.com
-Financial Tables Follow-
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES |
||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
||||||||
For the Quarters Ended |
For the Years Ended |
|||||||
December 31, |
December 31, |
|||||||
2014 |
2013 |
2014 |
2013 |
|||||
REVENUES |
$ 20,548,832 |
$ 22,800,321 |
$ 75,958,676 |
$ 72,112,662 |
||||
COST OF REVENUES |
15,841,731 |
16,873,793 |
58,217,667 |
54,446,324 |
||||
GROSS PROFIT |
4,707,101 |
5,926,528 |
17,741,009 |
17,666,338 |
||||
OPERATING EXPENSES: |
||||||||
Depreciation |
344,809 |
111,551 |
721,449 |
573,090 |
||||
Impairment loss |
3,799,947 |
2,573,256 |
3,799,947 |
2,573,256 |
||||
Selling, general and administrative |
1,603,198 |
425,959 |
4,193,643 |
3,034,189 |
||||
Research and development |
28,614 |
25,957 |
116,061 |
92,803 |
||||
Total Operating Expenses |
5,776,568 |
3,136,723 |
8,831,100 |
6,273,338 |
||||
INCOME (LOSS) FROM OPERATIONS |
(1,069,467) |
2,789,805 |
8,909,909 |
11,393,000 |
||||
OTHER INCOME (EXPENSE): |
||||||||
Interest income |
4,841 |
6,278 |
18,127 |
22,287 |
||||
Interest expense |
(59,913) |
(56,090) |
(238,226) |
(300,381) |
||||
Grant income |
14 |
- |
34,835 |
- |
||||
Foreign currency transaction gain |
(5) |
43,486 |
1,263 |
27,686 |
||||
Rental income, net |
33,874 |
- |
101,539 |
- |
||||
Other income |
- |
(235) |
- |
42,780 |
||||
Total Other Income (Expense), net |
(21,189) |
(6,561) |
(82,462) |
(207,628) |
||||
INCOME (LOSS) BEFORE INCOME TAXES |
(1,090,656) |
2,783,244 |
8,827,447 |
11,185,372 |
||||
INCOME TAXES |
1,956,930 |
673,556 |
4,561,030 |
2,999,795 |
||||
NET INCOME (LOSS) |
$ (3,047,586) |
$ 2,109,688 |
$ 4,266,417 |
$ 8,185,577 |
||||
COMPREHENSIVE INCOME (LOSS): |
||||||||
NET INCOME (LOSS) |
$ (3,047,586) |
$ 2,109,688 |
$ 4,266,417 |
$ 8,185,577 |
||||
OTHER COMPREHENSIVE (LOSS) INCOME: |
||||||||
Unrealized foreign currency translation gain (loss) |
237,441 |
590,131 |
(408,386) |
2,751,842 |
||||
COMPREHENSIVE INCOME (LOSS) |
$ (2,810,145) |
$ 2,699,819 |
$ 3,858,031 |
$ 10,937,419 |
||||
NET INCOME (LOSS) PER COMMON SHARE: |
||||||||
Basic |
$ (0.79) |
$ 0.60 |
$ 1.15 |
$ 2.55 |
||||
Diluted |
$ (0.79) |
$ 0.60 |
$ 1.15 |
$ 2.55 |
||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
||||||||
Basic |
3,859,986 |
3,503,502 |
3,715,300 |
3,210,791 |
||||
Diluted |
3,859,986 |
3,503,502 |
3,715,300 |
3,210,791 |
||||
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES |
|||
CONSOLIDATED BALANCE SHEETS |
|||
December 31, |
|||
2014 |
2013 |
||
ASSETS |
|||
CURRENT ASSETS: |
|||
Cash and cash equivalents |
$ 7,835,791 |
$ 1,114,873 |
|
Restricted cash |
488,719 |
687,353 |
|
Notes receivable |
114,034 |
703,718 |
|
Accounts receivable, net of allowance for doubtful accounts |
20,316,037 |
15,234,863 |
|
Inventories, net of reserve for obsolete inventories |
4,241,022 |
4,733,558 |
|
Advances to suppliers |
565,581 |
695,254 |
|
Prepaid VAT on purchases |
- |
489,302 |
|
Deferred tax assets - current portion |
375,744 |
253,173 |
|
Prepaid expenses and other |
153,260 |
74,030 |
|
Total Current Assets |
34,090,188 |
23,986,124 |
|
PROPERTY AND EQUIPMENT, net |
69,628,597 |
70,595,138 |
|
OTHER ASSETS: |
|||
Deferred tax assets - net of current portion |
- |
1,222,216 |
|
Equipment held for sale/operating lease |
422,540 |
4,751,206 |
|
Land use rights, net |
3,672,420 |
3,786,051 |
|
Total Assets |
$ 107,813,745 |
$ 104,340,735 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
CURRENT LIABILITIES: |
|||
Short-term bank loans |
$ 3,095,219 |
$ 3,109,453 |
|
Bank acceptance notes payable |
488,719 |
687,353 |
|
Accounts payable |
4,322,275 |
4,961,555 |
|
Accrued expenses |
1,059,579 |
899,816 |
|
Advances from customers |
495,461 |
1,455,740 |
|
VAT and service taxes payable |
500,569 |
126,349 |
|
Income taxes payable |
531,120 |
1,623,603 |
|
Total Current Liabilities |
10,492,942 |
12,863,869 |
|
Total Liabilities |
10,492,942 |
12,863,869 |
|
STOCKHOLDERS' EQUITY: |
|||
Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and |
|||
outstanding at December 31, 2014 and 2013) |
- |
- |
|
Common stock ($0.001 par value; 50,000,000 shares authorized; 3,859,986 and 3,503,502 |
|||
shares issued and outstanding at December 31, 2014 and 2013, respectively) |
3,860 |
3,503 |
|
Additional paid-in capital |
33,517,857 |
31,532,308 |
|
Retained earnings |
50,039,267 |
46,322,329 |
|
Statutory reserve |
3,294,199 |
2,744,720 |
|
Accumulated other comprehensive income - foreign currency translation adjustment |
10,465,620 |
10,874,006 |
|
Total Stockholders' Equity |
97,320,803 |
91,476,866 |
|
Total Liabilities and Stockholders' Equity |
$ 107,813,745 |
$ 104,340,735 |
|
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES |
|||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
For the Years Ended |
|||||||
December 31, |
|||||||
2014 |
2013 |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||
Net income |
$ 4,266,417 |
$ 8,185,577 |
|||||
Adjustments to reconcile net income from operations to net cash |
|||||||
provided by operating activities: |
|||||||
Depreciation |
8,469,771 |
6,704,386 |
|||||
Amortization of land use rights |
96,226 |
95,491 |
|||||
Increase in inventory reserve |
- |
41,381 |
|||||
Increase (decrease) in allowance for doubtful accounts |
521,928 |
(628,188) |
|||||
Increase in allowance for deferred tax assets |
2,165,677 |
- |
|||||
Loss on impairment of equipment held for sale/operating lease |
3,799,947 |
2,573,256 |
|||||
Loss on disposal of fixed assets |
- |
11,391 |
|||||
Stock-based compensation |
375,989 |
423,112 |
|||||
Changes in operating assets and liabilities: |
|||||||
Notes receivable |
586,014 |
(604,798) |
|||||
Accounts receivable |
(5,668,901) |
(4,126,440) |
|||||
Inventories |
470,509 |
1,303,519 |
|||||
Prepaid value-added taxes on purchases |
486,689 |
70,059 |
|||||
Prepaid and other current assets |
(94,718) |
91,666 |
|||||
Advances to suppliers |
126,394 |
(81,120) |
|||||
Deferred tax assets |
(1,080,469) |
- |
|||||
Accounts payable |
(872,178) |
(1,809,914) |
|||||
Accrued expenses |
164,465 |
(112,797) |
|||||
VAT and service taxes payable |
374,512 |
(86,004) |
|||||
Income taxes payable |
(1,077,373) |
(129,378) |
|||||
Advances from customers |
(952,885) |
(452,658) |
|||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
12,158,014 |
11,468,541 |
|||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||
Purchase of property and equipment |
(11,058,530) |
(14,633,745) |
|||||
Refund of previously purchased property and equipment |
3,991,405 |
- |
|||||
NET CASH USED IN INVESTING ACTIVITIES |
(7,067,125) |
(14,633,745) |
|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||
Principal payments on capital lease |
- |
(391,963) |
|||||
Proceeds from bank loans |
3,906,759 |
5,653,824 |
|||||
Repayments of bank loans |
(3,906,759) |
(4,846,135) |
|||||
Decrease (increase) in restricted cash |
195,338 |
(678,459) |
|||||
(Decrease) increase in bank acceptance notes payable |
(195,338) |
678,459 |
|||||
Net proceeds from sale of common stock |
1,623,691 |
2,388,589 |
|||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
1,623,691 |
2,804,315 |
|||||
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS |
6,338 |
30,034 |
|||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
6,720,918 |
(330,855) |
|||||
CASH AND CASH EQUIVALENTS - beginning of year |
1,114,873 |
1,445,728 |
|||||
CASH AND CASH EQUIVALENTS - end of year |
$ 7,835,791 |
$ 1,114,873 |
|||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|||||||
Cash paid for: |
|||||||
Interest |
$ 238,226 |
$ 300,381 |
|||||
Income taxes |
$ 4,553,195 |
$ 3,129,174 |
|||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|||||||
Property and equipment acquired on credit as payable |
$ 256,082 |
$ 1,121,719 |
|||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
||||||||
(Amounts expressed in US$) |
||||||||
For the Three Months Ended |
For the Years Ended |
|||||||
2014 |
2013 |
2014 |
2013 |
|||||
Net income (loss) |
$ |
(3,047,586) |
2,109,688 |
4,266,417 |
8,185,577 |
|||
Add: income tax |
1,956,930 |
673,556 |
4,561,030 |
2,999,795 |
||||
Add: interest expense |
59,913 |
56,090 |
238,226 |
300,381 |
||||
Add: impairment loss for ESR equipment |
3,799,947 |
2,573,256 |
3,799,947 |
2,573,256 |
||||
Add: depreciation and amortization |
2,248,133 |
1,845,717 |
8,565,997 |
6,799,877 |
||||
Adjusted EBITDA |
$ |
5,017,337 |
7,258,307 |
21,431,617 |
20,858,886 |
|||
Reconciliation of Non-GAAP Adjusted Net Income and EPS |
||||||||
(Amounts expressed in US$) |
||||||||
For the Three Months Ended |
For the Years Ended |
|||||||
2014 |
2013 |
2014 |
2013 |
|||||
Net income (loss) |
$ (3,047,586) |
$ 2,109,688 |
$ 4,266,417 |
$ 8,185,577 |
||||
Add: impairment loss for ESR equipment |
$ 3,799,947 |
$ 2,573,256 |
$ 3,799,947 |
$ 2,573,256 |
||||
Add: allowance for prior deferred tax asset on ESR |
1,215,690 |
- |
1,215,690 |
- |
||||
Non-GAAP adjusted net income |
$ 1,968,051 |
$ 4,682,944 |
$ 9,282,054 |
$ 10,758,833 |
||||
Weighted average shares - diluted |
3,859,986 |
3,503,502 |
3,715,300 |
3,210,791 |
||||
Non-GAAP adjusted diluted EPS |
$ 0.51 |
$ 1.34 |
$ 2.50 |
$ 3.35 |
||||
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