WUXI, China, November 13, 2013 /PRNewswire-FirstCall/ -- 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 and nine months ended September 30, 2013. "In the third quarter, we saw modest growth in revenue, were profitable and generated strong operating cash flow. Our dyeing machine segment continued to perform well, supported by growing adoption of our low-emission airflow dyeing machines. This increase was offset by a decrease in sales of forged rolled rings and related products for industries other than the wind power industry," said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. "We are in the process of installing equipment that will expand capacity of our dyeing equipment segment and allow us to produce new, higher-end machines that we expect to drive improvements in our competitive position and financial results in 2014. We are also encouraged by recent discussions with our solar customer and expect to see some traction in this area soon, although we did not generate any revenue from solar products during the third quarter and we have no backlog of orders from these products."
Third Quarter 2013 Results
Revenue for the third quarter of 2013 increased 5.0% to $18.2 million, compared to $17.3 million for the same period of 2012.
Revenue growth was primarily driven by sales of dyeing and finishing equipment due to demand for the Company's low-emission airflow dyeing machines, which meet the policies of local PRC governments to phase out obsolete equipment and reduce pollution from the dyeing process. In addition, the Company experienced a modest increase in sales for forged rolled rings and related products for customers in the wind power industry, which was offset by a decline in sales of forged products from customers in other industries.
The increase in revenue is summarized as follows:
Gross profit for the third quarter of 2013 increased 7.3% to $4.6 million, compared to $4.3 million for the same period in 2012. Gross margin increased to 25.5% during the third quarter of 2013 compared to 24.9% for the same period a year ago. The increase in gross margin for the third quarter was primarily attributable to (i) increased operational and cost efficiencies for forged rolled rings and related products segment, including the allocation of fixed costs primarily consisting of depreciation, to cost of revenues as the Company operated at higher production levels and (ii) a slight decrease in raw materials costs in both the forged rolled rings and related products and dyeing equipment segments.
Operating expenses rose 28.1% to $1.4 million, compared to $1.1 million in the comparable period last year. The increase was primarily due to bad debt expense, partially offset by lower depreciation expenses resulting from the classification of certain equipment as held for sale in the fourth quarter of 2012, on which depreciation was taken in the third quarter of 2012 but not in the third quarter of 2013.
Selling, general and administrative expenses for the three months ended September 30, 2013 rose 78.1% to $1.3 million, primarily due to a $0.4 million bad debt expense, an increase in stock based compensation expenses and an increase in research and development expense related to the Company's new dyeing equipment.
Operating income was $3.2 million, unchanged from the same period of 2012. Operating margin was 17.6% compared to 18.5% in the third quarter last year.
Adjusted EBITDA, a non-GAAP measurement, which adds back to net income interest expense, income tax, depreciation and amortization, was $4.9 million, which is the same as for the third quarter last year. The calculation of adjusted EBITDA is shown in a table following the financial tables.
Net income for the third quarter of 2013 was $2.1 million, or $0.61 per diluted share, compared to $2.4 million, or $0.88 per diluted share, in the third quarter of 2012. Diluted earnings per share were calculated using diluted weighted average shares of 3,479,646 and 2,667,017 for the three months ended September 30, 2013 and 2012, respectively. All share and per share information has been adjusted to reflect a one-for-ten reverse stock split effective March 6, 2012.
Nine Month Results
For the nine months ended September 30, 2013, revenue increased 24.6% to $49.3 million from $39.6 million in the first nine months of 2012. Gross profit increased 32.0% to $11.7 million, compared to $8.9 million in the same period last year. Gross margin for first nine months of 2013 was 23.8%, compared to 22.5% in the first nine months of 2012. Operating income increased 53.2% to $8.6 million from $5.6 million in the first nine months of 2012. Adjusted EBITDA, a non-GAAP measurement which adds interest expense, income tax, warrant modification expense (which was incurred in the first quarter of 2012), depreciation and amortization back to net income, was $13.6 million, compared to $10.5 million in the first nine months of 2012. Net income was $6.1 million, or $1.95 per diluted share, up from $3.7 million, or $1.42 per diluted share, in the first nine months of 2012. All share and per share information have been adjusted to reflect a one-for-ten reverse stock split effective March 6, 2012.
Financial Condition
As of September 30, 2013, Cleantech Solutions held cash and cash equivalents of $2.2 million compared with $1.4 million at December 31, 2012. Accounts receivable were $11.5 million and total current assets of $23.6 million as of September 30, 2013. The Company had $3.1 million in short-term bank loans payable at September 30, 2013, up from $2.2 million at December 31, 2012. Stockholders' equity was $88.8 million at September 30, 2013.
In the first nine months of 2013, the Company generated $7.9 million in cash flow from operations. The increase in short term loans, combined with $2.4 million in net proceeds from the sale of shares issued in the second and third quarters of 2013 and cash flow from operations was used to fund approximately $9.9 million in capital expenditures to expand production capabilities and purchase equipment for the Company's dyeing and finishing equipment segment.
Upcoming Events
Cleantech Solutions will hold its annual meeting of stockholders on December 10, 2013. The board of directors has fixed the close of business on October 23, 2013 as the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting. The proxy statement is available on the SEC's website and Company's website at http://www.cleantechsolutionsinternational.com/sec.php.
Business Outlook
Based on current and anticipated orders, for the full year ending December 31, 2013, the Company expects revenue in the range of $60 - $62 million and net income in the range of $8.0 - $8.5 million, excluding the impact of any year-end adjustments to the carrying value of equipment held for sale.
"As we approach the end of 2013, we expect our dyeing machine segment to continue to be our main revenue driver in the fourth quarter and beyond. We are encouraged by the improving Chinese economy although tight credit conditions are likely to persist. This is causing many manufacturers to focus on the quality and durability of their equipment purchases rather than price alone. We believe our new line of high-end airflow and traditional dyeing machines and our after treatment compacting machine position our Company for further growth in 2014."
"We are also hopeful that we will secure orders for solar products in the near future and for our new oil and gas products in 2014, although we cannot predict the timing or extent of any sales. The wind power market continues to face near-term challenges, and we expect sales to customers in this industry to remain near current levels. We will continue to utilize our assets and modify our product lines with a view of achieving strong financial performance and respond to the needs of heavy equipment and clean technology industries," Mr. Wu concluded.
Conference Call
Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Time on Wednesday, November 13, 2013 to discuss financial results for the third quarter ended September 30, 2013.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 870-4263. International callers should dial (412) 397-0790.
If you are unable to participate in the conference call at this time, a replay will be available starting an hour after the conference call through 10:00 A.M. ET November 20, 2013. To access the replay, dial (877) 344-7529. International callers dial (412) 317-0088, and enter conference number: 10036945.
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 used in various clean technology and manufacturing industries and textile dyeing and finishing machines. The Company supplies forging products, fabricated products and machining services to a range of clean technology and manufacturing customers and supplies dyeing and finishing equipment to the textile industry. Cleantech Solutions is committed to achieving long-term growth through ongoing technological improvement, capacity expansion, and the development of a strong customer base. 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, 2012 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended September 30, 2013. 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
Web: www.compassinvestorrelations.com
- Financial Tables Follow-
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||||||
For the Three Months | For the Nine Months | |||||||||||
Ended | Ended | |||||||||||
September 30, | September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
REVENUES | $ | 18,213,508 | $ | 17,343,723 | $ | 49,312,341 | $ | 39,585,815 | ||||
COST OF REVENUES | 13,576,808 | 13,024,265 | 37,572,531 | 30,689,436 | ||||||||
GROSS PROFIT | 4,636,700 | 4,319,458 | 11,739,810 | 8,896,379 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Depreciation | 109,652 | 373,896 | 461,539 | 1,122,432 | ||||||||
Selling, general and administrative | 1,316,925 | 739,386 | 2,675,076 | 2,157,053 | ||||||||
Total Operating Expenses | 1,426,577 | 1,113,282 | 3,136,615 | 3,279,485 | ||||||||
INCOME FROM OPERATIONS | 3,210,123 | 3,206,176 | 8,603,195 | 5,616,894 | ||||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest income | 14,840 | 5,069 | 16,009 | 10,919 | ||||||||
Interest expense | (74,638) | (84,289) | (244,291) | (244,685) | ||||||||
Foreign currency (loss) gain | (9,821) | 1,251 | (15,800) | 6,642 | ||||||||
Warrant modification expense | - | - | - | (235,133) | ||||||||
Other income | 5,933 | 51,523 | 43,015 | 64,803 | ||||||||
Total Other Income (Expense), net | (63,686) | (26,446) | (201,067) | (397,454) | ||||||||
INCOME BEFORE INCOME TAXES | 3,146,437 | 3,179,730 | 8,402,128 | 5,219,440 | ||||||||
INCOME TAXES | 1,015,701 | 824,628 | 2,326,239 | 1,490,173 | ||||||||
NET INCOME | $ | 2,130,736 | $ | 2,355,102 | $ | 6,075,889 | $ | 3,729,267 | ||||
COMPREHENSIVE INCOME: | ||||||||||||
NET INCOME | $ | 2,130,736 | $ | 2,355,102 | $ | 6,075,889 | $ | 3,729,267 | ||||
OTHER COMPREHENSIVE INCOME: | ||||||||||||
Unrealized foreign currency translation gain (loss) | 516,244 | (169,625) | 2,161,711 | 342,015 | ||||||||
COMPREHENSIVE INCOME | $ | 2,646,980 | $ | 2,185,477 | $ | 8,237,600 | $ | 4,071,282 | ||||
NET INCOME PER COMMON SHARE: | ||||||||||||
Basic | $ | 0.61 | $ | 0.88 | $ | 1.95 | $ | 1.51 | ||||
Diluted | $ | 0.61 | $ | 0.88 | $ | 1.95 | $ | 1.42 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||
Basic | 3,479,646 | 2,667,017 | 3,112,148 | 2,469,818 | ||||||||
Diluted | 3,479,646 | 2,667,017 | 3,112,148 | 2,617,798 | ||||||||
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
September | December | |||||
(Unaudited) | ||||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 2,223,017 | $ | 1,445,728 | ||
Restricted cash | 796,567 | - | ||||
Notes receivable | 485,793 | 88,029 | ||||
Accounts receivable, net of allowance for doubtful accounts | 11,545,834 | 10,078,623 | ||||
Inventories, net of reserve for obsolete inventory | 6,216,215 | 5,897,555 | ||||
Advances to suppliers | 1,303,911 | 593,104 | ||||
Prepaid VAT on purchases | 830,361 | 542,032 | ||||
Prepaid expenses and other | 227,651 | 428,326 | ||||
Total Current Assets | 23,629,349 | 19,073,397 | ||||
PROPERTY AND EQUIPMENT - net | 66,699,091 | 59,436,100 | ||||
OTHER ASSETS: | ||||||
Deferred tax assets | 566,666 | 551,890 | ||||
Equipment held for sale | 7,309,150 | 7,118,555 | ||||
Land use rights, net | 3,784,841 | 3,756,342 | ||||
Total Assets | $ | 101,989,097 | $ | 89,936,284 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Short-term bank loans | $ | 3,088,728 | $ | 2,216,558 | ||
Bank acceptance notes payable | 796,567 | - | ||||
Accounts payable | 5,494,461 | 5,474,479 | ||||
Accrued expenses | 552,758 | 986,824 | ||||
Capital lease obligation - current portion | - | 251,413 | ||||
Advances from customers | 2,210,102 | 1,851,987 | ||||
VAT and service taxes payable | - | 206,527 | ||||
Income taxes payable | 1,069,434 | 822,082 | ||||
Total Current Liabilities | 13,212,050 | 11,809,870 | ||||
OTHER LIABILITIES: | ||||||
Capital lease obligation - net of current portion | - | 132,756 | ||||
Total Liabilities | 13,212,050 | 11,942,626 | ||||
STOCKHOLDERS' EQUITY: | ||||||
Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and outstanding at September 30, 2013 and December 31, 2012, respectively) | - | - | ||||
Common stock ($0.001 par value; 50,000,000 shares authorized; 3,503,502 and 2,894,586 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively) | 3,503 | 2,894 | ||||
Additional paid-in capital | 31,532,308 | 28,987,128 | ||||
Retained earnings | 44,200,317 | 38,401,734 | ||||
Statutory reserve | 2,757,044 | 2,479,738 | ||||
Accumulated other comprehensive gain - foreign currency translation adjustment | 10,283,875 | 8,122,164 | ||||
Total Stockholders' Equity | 88,777,047 | 77,993,658 | ||||
Total Liabilities and Stockholders' Equity | $ | 101,989,097 | $ | 89,936,284 | ||
CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
For the Nine Months Ended | ||||||
September 30, | ||||||
2013 | 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 6,075,889 | $ | 3,729,267 | ||
Adjustments to reconcile net income from operations to net cash | ||||||
provided by operating activities: | ||||||
Depreciation | 4,882,899 | 4,719,769 | ||||
Amortization of land use rights | 71,261 | 70,068 | ||||
Increase (decrease) in allowance for doubtful accounts | 76,784 | (46,616) | ||||
Warrant modification expense | - | 235,133 | ||||
Stock-based compensation expense | 278,034 | 129,030 | ||||
Changes in operating assets and liabilities: | ||||||
Notes receivable | (390,950) | (112,209) | ||||
Accounts receivable | (1,260,651) | (3,368,092) | ||||
Inventories | (158,944) | (1,925,810) | ||||
Prepaid value-added taxes on purchases | (270,730) | 844,969 | ||||
Prepaid and other current assets | 82,378 | (41,315) | ||||
Advances to suppliers | (687,094) | (627,455) | ||||
Accounts payable | (672,461) | 1,310,123 | ||||
Accrued expenses | (451,672) | (49,578) | ||||
VAT and service taxes payable | (209,667) | - | ||||
Income taxes payable | 222,801 | 289,230 | ||||
Advances from customers | 305,052 | 668,446 | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 7,892,929 | 5,824,960 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchase of property and equipment | (9,943,309) | (6,334,776) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (9,943,309) | (6,334,776) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Principal payments on capital lease | (390,009) | (205,509) | ||||
Proceeds from bank loans | 4,821,973 | 2,686,706 | ||||
Repayments of bank loans | (4,018,311) | (2,370,623) | ||||
(Increase) decrease in restricted cash | (787,589) | 316,083 | ||||
Increase (decrease) in bank acceptance notes payable | 787,589 | (316,083) | ||||
Net proceeds from sale of common stock | 2,388,589 | - | ||||
Proceeds from exercise of warrants | - | 198,142 | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 2,802,242 | 308,716 | ||||
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS | 25,427 | 3,898 | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 777,289 | (197,202) | ||||
CASH AND CASH EQUIVALENTS - beginning of period | 1,445,728 | 1,152,607 | ||||
CASH AND CASH EQUIVALENTS - end of period | $ | 2,223,017 | $ | 955,405 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||
Cash paid for: | ||||||
Interest | $ | 244,291 | $ | 244,685 | ||
Income taxes | $ | 2,103,438 | $ | 1,200,944 | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||
Property and equipment acquired on credit as payable | $ | 547,294 | $ | - | ||
Series A preferred converted to common shares | $ | - | $ | 13,198 | ||
Common stock issued for future service | $ | 78,600 | $ | 27,440 | ||
Reconciliation of Net Income to EBITDA | |||||||||||
(Amounts expressed in US$) | |||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Net income | $ | 2,130,736 | $ | 2,355,102 | $ | 6,075,889 | $ | 3,729,267 | |||
Add: income tax | 1,015,701 | 824,628 | 2,326,239 | 1,490,173 | |||||||
Add: interest expense | 74,638 | 84,289 | 244,291 | 244,685 | |||||||
Add: warrant modification expense | - | - | - | 235,133 | |||||||
Add: depreciation and amortization | 1,685,694 | 1,650,599 | 4,954,160 | 4,789,837 | |||||||
Adjusted EBITDA | $ | 4,906,769 | $ | $4,914,618 | $ | 13,600,579 | $ | 10,489,095 | |||
Reconciliation of Non GAAP Operating Income, Net Income and EPS | |||||||||||
(Amounts expressed in US$) | |||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Net income | $2,130,736 | $2,355,102 | $6,075,889 | $3,729,267 | |||||||
Add: warrant modification expense | - | - | - | 235,133 | |||||||
Adjusted net income | $2,130,736 | $2,355,102 | $6,075,889 | $3,964,400 | |||||||
Weighted average shares - diluted | 3,479,646 | 2,667,017 | 3,112,148 | 2,617,798 | |||||||
Adjusted diluted EPS | $0.61 | $0.88 | $1.95 | $1.51 | |||||||
