XI'AN, China, May 14, 2014 /PRNewswire-FirstCall/ -- China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in
First Quarter 2014 Financial Highlights
Summary of Financial Results:
(US$ in thousands, except for per share data) | Three Months Ended March 31 | |
2014 | 2013 | |
Total Sales (1) + (2) | 178 | 14,341 |
(1) Sales of Systems | - | 14,080 |
(2) Contingent Rental Income | 178 | 261 |
Gross Profit | 156 | 3,440 |
Interest Income on Sales-Type Leases | 6,306 | 3,825 |
Total Operating Income | 6,461 | 7,264 |
Net Income | 3,123 | 3,298 |
Basic EPS | 0.05 | 0.07 |
Diluted EPS | 0.05 | 0.07 |
Mr. Guohua Ku, Chairman and CEO of CREG commented, "We are very pleased with the strong growth in the interest income on sales-type leases which now forms an important source of revenue and contributes to the long-term sustainable growth of our business by generating stable and recurring monthly lease payments over the course of the lease term. At US$6.3 million, we have reached a record high that will continue for the rest of this year. While we recognized very little sales this quarter as no project under construction was completed, these projects are progressing well and on schedule. Adding to our current backlog of future revenues, we signed a contract with Tangshan Baoliyuan Coking and entered into a framework agreement with Hebei Xuyang Coking."
"In February, Xi'an TCH entered into two trust loan agreements with Zhongrong International Trust Co., Ltd for an aggregate amount of US$46.6 million to support our CDQ projects. This demonstrates the continued confidence of the financial community in our business prospects on the back of a clear and strong commitment from the Chinese government to continue to address environmental challenges in order to improve the daily life of its citizens."
"With a strong pipeline and support from the financial community, we believe we are well positioned to capture the rising demand for energy savings and reducing pollution and emissions. We are confident in our ability to continue to grow our business and increase shareholder value."
First Quarter 2014 Financial Results
SALES. Total sales, including sales of systems and contingent rental income, were US$0.18 million for the first quarter of 2014, as compared with US$14.34 million for the same period of 2013, a decrease of $14.16 million as the Company did not recognize any revenues since no projects were completed in the first quarter of 2014.
Sales of systems for the first quarter of 2014 were US$0, as compared with US$14.08 million for the same period of 2013. For the three months ended March 31, 2014, no power generation system was completed and sold. In comparison, in the same period of 2013, the Shenqiu Phase II system was completed and sold. For the first quarter of 2014, the Company received contingent rental income of US$0.18 million from the usage of electricity in addition to the minimum lease payments, compared with US$0.26 million for the first quarter of 2013. For sales-type leases, sales and cost of sales ("COS") are recorded at the time of the lease; in addition to sales revenue, CREG's other major source of revenues is interest income from sales-type leases.
COST OF SALES. Cost of sales for the first quarter of 2014 was US$0.02, a decrease of US$10.88 million as compared with US$10.90 million in the same period of 2013. This decrease was mainly due to the lack of the completion and sales of any power generation systems for the first quarter of 2014, in comparison to the same period in 2013 when the Shenqiu Phase II project was sold.
GROSS PROFIT and GROSS MARGIN. Gross profit was US$0.16 million for the first quarter of 2014, compared with US$3.44 million for the same period of 2013. Blended gross margin for the first quarter of 2014 increased to 88% from 24% for the same period of 2013. The increased profit margin for the first quarter of 2014 was mainly attributable to contingent rental income; for the same period of 2013, the profit margin for project sales was lower, ranging between 23% to 28%.
INTEREST INCOME ON SALES TYPE LEASES. Interest income on sales-type leases for the first quarter of 2014 was US$6.31 million, an increase of 64.9% from US$3.82 million for the same period of 2013. This increase was primarily due to a greater number of sales-type leases in the first period of 2014. During the first quarter of 2014, interest income was derived from fifteen sales-type leases, including TRT system to Changzhi (13 year term), CHPG systems to Jing Yang Shengwei (5 year term), BMPG systems to Pucheng Phase I and II (15 year and 11.75 year, respectively), BMPG systems to Shenqiu Phase I (11 year term) and Shenqiu Phase II (9.5 year term), WHPG system of Zhongbao (9 year term), WHPG systems of Jitie (24 year term), two TRT systems to Datong (30 year term), and five power and steam generating systems to Erdos (20 year term). In comparison, during the same period of 2013, interest income was derived from eleven systems.
OPERATING EXPENSES. Operating expenses totaled US$0.84 million for the first quarter of 2014, a decrease of 21.9% as compared with US$1.08 million in the same period of 2013. The decrease was mainly due to a US$0.25 million decrease in legal and consulting expenses compared to the same period of last year.
NON-OPERATING INCOME (EXPENSES). Non-operating expenses consisted of non-sales-type lease interest income, interest expenses, bank charges and miscellaneous expenses. For the first quarter of 2014, net non-operating expenses were US$1.28 million, compared with US$1.40 million for the same period of 2013.
NET INCOME. Net income for the first quarter of 2014 was US$3.12 million, a decrease of US$0.18 million compared with US$3.30 million for the same period of 2013. This decrease in net income was mainly due to the lack of sales of systems in the first quarter of 2014 though CREG significantly increased interest income from sales-type leases.
For the first quarter of 2014, basic and fully diluted EPS was US$0.05, compared with US$0.07 in the same period of 2013.
Financial Position as of March 31, 2014
As of March 31, 2014, the Company had cash and cash equivalents of US$16.24 million. Other current assets were US$12.93 million and current liabilities were US$31.39 million. Total shareholders' equity was US$156.39 million, as compared with US$154.68 million as of December 31, 2013.
Net Investment in Sales-Type Leases as of March 31, 2014
The components of the net investment in sales-type leases as of March 31, 2014 and December 31, 2013 are as follows:
(US$) | March 31, 2014 | December 31, 2013 |
Total future minimum lease payments receivable | 544,714,357 | 560,187,391 |
Less: executory cost | (131,019,483) | (134,447,605) |
Less: unearned interest income | (233,333,440) | (241,234,839) |
Net investment in sales - type leases | 180,361,434 | 184,504,947 |
Current portion | 8,353,510 | 9,063,386 |
Noncurrent portion | 172,007,924 | 175,441,561 |
As of March 31, 2014, the future minimum rentals to be received on non-cancelable sales-type leases by years were as follows:
2014 | US$41,507,794 |
2015 | 39,108,706 |
2016 | 39,108,706 |
2017 | 39,108,706 |
2018 | 38,970,724 |
Thereafter | 346,909,721 |
Total | US$544,714,357 |
Recent Business Development
CREG announced on March 31, 2014 that its wholly owned subsidiary Xi'an TCH has entered into a framework agreement with Hebei Xuyang Coking Co., Ltd. to build a Coke Dry Quenching ("CDQ") system and a CDQ waste heat power generation plant. Xi'an TCH will design, build and maintain two 25MW waste heat power generation systems. The energy-saving benefit sharing period is 20 years.
On March 28, 2014, CREG announced that its subsidiary Xi'an TCH was awarded Shaanxi Government Special Financial Award. According to "Notification of special development funds plan for small and medium enterprises" issued by the SME Promotion Bureau of Shaanxi Province, Xi'an TCH's application of "cement production line pure low temperature waste heat power generation" was granted a government subsidy.
On March 26, 2014, CREG announced that its subsidiary Xi'an TCH has signed an EMC Contract with Tangshan Baoliyuan Coking Co., Ltd., to invest in a Coke Dry Quenching (CDQ) waste heat power generation project using the BOT method. Xi'an TCH will construct a CDQ system and a 25MW waste heat power generation plant. The operation term is 20 years and the payback period is 4 years.
CREG announced on February 26, 2014, its subsidiary Xi'an TCH has entered into two trust loan agreements with an aggregate amount of US$46.6 million (RMB285 million) from Zhongrong International Trust Co., Ltd. to support the Company's CDQ projects.
Financial Results Conference Call
The Company will host a conference call at 8:30 a.m. EST on Thursday, May 15, 2014, to discuss the Company's first quarter 2014 financial results. Mr. Guohua Ku, Chief Executive Officer, and Mr. David Chong, Chief Financial Officer, will be hosting the call.
Listeners may access the call by dialing:
International: | +852-3056-2688 |
US Toll Free: | 1877-679-2987 |
China: | 400-603-9021 |
Participant PIN Code: | 665723# |
If you are unable to participate in the call at this time, a replay of the call will be available for one hour following the call starting at 9:30 a.m. EST, May 15, 2014 and ending at 9:30 a.m. EST on June 13, 2014. Listeners may access the replay by dialing:
International: | +852-3060-0238 |
US Toll Free: | 1866-345-5132 |
China Toll Free: | 1080-0265-2561 (Southern China); 1080-0650-0588 (Northern China) |
Conference Reference: | 212644# |
10Q Filing
For more information regarding China Recycling Energy Corp.'s financial performance during the first quarter ended March 31, 2014, please refer to the Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on May 14, 2014.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings that exclude the effect of non-cash, non-operating expenses related to the Convertible Notes issued in April 2008, and the compensation expenses for the fair value of stock options, as well as deferred income tax expenses. The Company uses non-GAAP financial measures when it internally evaluates the performance of its business and makes operating decisions, including internal budgeting and performance measurement. The Company believes that providing the non-GAAP measures is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand CREG's financial performance in comparison to historical periods, and it allows investors to evaluate CREG's performance using the same methodology and information as that used by the Company's management. However, investors need to be aware that non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP, and they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure.
About
China Recycling Energy Corp. (NASDAQ: CREG or "the Company") is based in Xi'an,
This press release may contain certain "forward-looking statements" relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. 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 at http://www.sec.gov. All forward-looking statements attributable to the Company or 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.
For more information, please contact:
Mr. David Chong, Chief Financial Officer
Tel: +86-1370-1813139; +65-9721 6163
Christensen
Mr. Rene Vanguestaine (
Tel: +86 135 2160 9333
Email: rvanguestaine@christensenIR.com
Mr. Christian Arnell (
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2014 AND DECEMBER 31, 2013 2014 2013 (UNAUDITED) ASSETS CURRENT ASSETS Cash & equivalents $ 16,237,957 $ 7,701,530 Restricted cash 731,458 2,296,249 Accounts receivable 12,535 71,573 Current portion of investment in sales type leases, net 8,353,510 9,063,386 Interest receivable on sales type leases 1,148,898 765,010 Prepaid expenses 991,438 1,045,802 Other receivables 1,604,529 1,813,220 Notes receivable - 656,071 Prepaid loan fees - current 82,899 83,649 Total current assets 29,163,224 23,496,490 NON-CURRENT ASSETS Prepaid loan fees - noncurrent 103,623 125,474 Investment in sales type leases, net 172,007,924 175,441,561 Long term investment 702,833 738,513 Long term deposit 381,618 385,073 Property and equipment, net 34,334 44,243 Construction in progress 105,178,173 83,719,596 Total non-current assets 278,408,505 260,454,459 TOTAL ASSETS $ 307,571,729 $ 283,950,949 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,661,885 $ 2,642,662 Notes payable - bank acceptances 3,576,015 5,740,622 Taxes payable 2,205,596 1,560,829 Accrued liabilities and other payables 1,597,252 1,517,191 Due to related parties 7,287,929 2,420,391 Deferred tax liability 1,351,555 1,442,317 Loans payable - current 10,971,864 14,925,618 Interest payable on entrusted loans 283,722 287,887 Current portion of long term payable 1,456,452 1,441,051 Total current liabilities 31,392,270 31,978,568 NONCURRENT LIABILITIES Deferred tax liability, net 12,201,609 11,884,068 Refundable deposit from customers for systems leasing 1,154,077 1,164,526 Long term payable 1,989,108 2,385,422 Loans payable 42,034,427 18,862,045 Entrusted loan payable 62,092,619 62,654,792 Total noncurrent liabilities 119,471,840 96,950,852 Total liabilities 150,864,110 128,929,421 CONTINGENCIES AND COMMITMENTS - - STOCKHOLDERS' EQUITY Common stock, $0.001 par value; 100,000,000 shares authorized, 60,910,058 shares issued and outstanding as of March 31, 2014 and 2013 60,910 60,910 Additional paid in capital 78,130,053 78,130,053 Statutory reserve 10,041,240 9,672,754 Accumulated other comprehensive income 14,796,918 16,209,403 Retained earnings 53,357,830 50,603,291 Total Company stockholders' equity 156,386,951 154,676,411 Noncontrolling interest 320,668 345,117 Total equity 156,707,619 155,021,528 TOTAL LIABILITIES AND EQUITY $ 307,571,729 $ 283,950,949 CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) THREE MONTHS ENDED MARCH 31, 2014 2013 (UNAUDITED) Revenue Sales of systems $ - $ 14,079,796 Contingent rental income 177,607 260,775 Total revenue 177,607 14,340,571 Cost of sales Cost of contingent rental income and systems 21,904 10,900,912 Total cost of sales 21,904 10,900,912 Gross profit 155,703 3,439,659 Interest income on sales-type leases 6,305,716 3,824,840 Total operating income 6,461,419 7,264,499 Operating expenses General and administrative 844,975 1,082,446 Total operating expenses 844,975 1,082,446 Income from operations 5,616,444 6,182,053 Non-operating income (expenses) Interest income 39,289 92,588 Interest expense (912,573) (1,494,496) Investment income 11,313 - Other expenses (415,391) (980) Total non-operating expenses, net (1,277,362) (1,402,888) Income before income tax 4,339,082 4,779,165 Income tax expense 1,237,529 1,360,054 Income before noncontrolling interest 3,101,553 3,419,111 Less: Income (loss) attributable to noncontrolling interest (21,471) 120,921 Net income attributable to China Recycling Energy Corp 3,123,024 3,298,190 Other comprehensive items Foreign currency translation gain (loss) (1,412,485) 325,334 Foreign currency translation gain (2,978) 11,774 Comprehensive income attributable to China Recycling Energy Corp $ 1,710,539 $ 3,623,524 Comprehensive income (loss) attributable to noncontrolling interest $ (24,449) $ 132,695 Basic weighted average shares outstanding 60,912,775 50,224,350 Diluted weighted average shares outstanding 61,103,645 50,945,906 Basic earnings per share $ 0.05 $ 0.07 Diluted earnings per share $ 0.05 $ 0.07
attributable to China Recycling Energy Corp
attributable to noncontrolling interest
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
THREE MONTHS ENDED MARCH 31, | ||||
2014 | 2013 | |||
(UNAUDITED) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Income including noncontrolling interest | $ | 3,101,553 | $ | 3,419,111 |
Adjustments to reconcile income including noncontrolling | ||||
interest to net cash provided by (used in) operating activities: | ||||
Changes in sales type leases receivables | - | (14,079,796) | ||
Depreciation and amortization | 9,565 | 11,305 | ||
Amortization of prepaid loan fees | 20,840 | 20,307 | ||
Changes in deferred tax | 348,282 | 751,402 | ||
Changes in assets and liabilities: | ||||
Interest receivable on sales type lease | (392,930) | 850,419 | ||
Collection of principal on sales type leases | 2,501,901 | 2,179,702 | ||
Prepaid expenses | 45,231 | (3,749) | ||
Accounts receivable | 58,721 | 26,074 | ||
Other receivables | 222,711 | (78,746) | ||
Construction in progress | (22,333,546) | 1,655,880 | ||
Accounts payable | (2,081,703) | 4,268,535 | ||
Taxes payable | 662,444 | 128,657 | ||
Interest payable | (1,591) | 975,447 | ||
Accrued liabilities and other payables | 89,872 | 271,341 | ||
Accrued interest on convertible notes | - | 179,183 | ||
Net cash provided by (used in) operating activities | (17,748,650) | 575,072 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Changes of restricted cash | 1,552,795 | 1,692,761 | ||
Acquisition of property & equipment | - | (4,420) | ||
Net cash provided by investing activities | 1,552,795 | 1,688,341 | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Notes receivable | 653,808 | (637,095) | ||
Proceeds from loans | 27,149,395 | 4,778,211 | ||
Repayment of loans | (7,518,797) | (6,848,770) | ||
Long term payable | (348,512) | - | ||
Convertible note | - | (313,941) | ||
Advance from related parties | 4,916,108 | 482,283 | ||
Net cash provided by (used in) financing activities | 24,852,002 | (2,539,312) | ||
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS | (119,720) | 121,144 | ||
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS | 8,536,427 | (154,755) | ||
CASH & EQUIVALENTS, BEGINNING OF PERIOD | 7,701,530 | 45,004,304 | ||
CASH & EQUIVALENTS, END OF PERIOD | $ | 16,237,957 | $ | 44,849,549 |
Supplemental cash flow data: | ||||
Income tax paid | $ | 500,315 | $ | 481,732 |
Interest paid | $ | 3,540,294 | $ | 513,574 |
