-- Revenue Grew by 95.6% to $23.2 Million in FY 2008
-- Gross Profit Increased by 138.2% to $5.1 Million in FY 2008
-- Net Income Rose by 73.3% to $1.1 Million in FY 2008
SHANGHAI, March 31 /PRNewswire-Asia/ -- China Energy Recovery, Inc.
(OTC Bulletin Board: CGYV) (ISIN: US16943V2060; "CER"), a leader in the waste heat energy recovery sector of the industrial energy efficiency industry, today announced record financial results for the fiscal year and fourth quarter ended December 31, 2008.
Full Year 2008 Financial Results
Revenue for 2008 increased by 95.6% to $23.18 million from $11.85 million in 2007. Product sales generated revenue of $18.50 million, or 79.8% of the total revenue, and increased by 125.7% from $8.20 million in 2007. Design services generated revenue of $1.27 million, or 5.5% of the total revenue, and increased by 187.8% from $0.44 million in 2007. Revenue from an EPC (engineering, procurement and construction) project that required the company's special technological expertise accounted for $3.42 million, or 14.7% of the total revenue.
Gross profit increased to $5.07 million, a 138.2% increase from $2.13 million in 2007. The company's gross margin was 21.9%, compared to 18.0% in 2007. The increase in the company's gross margin is mainly due to an increase of licensing and design service contracts, which normally achieve greater margins, and our obtaining higher margin orders leveraging our special technical expertise.
Operating income increased by 110.6% to $1.61 million in 2008 from $0.76 million in 2007. If the expenses of $1.47 million related to public company operations, including $0.72 million in non-cash, stock-based service and compensation expenses and finance expense, were excluded so as to be comparable to 2007 in which the company did not incur such expenses, operating income would have amounted to $3.08 million.
Net income for 2008 was $1.11 million, an increase of 73.3% from $0.64 million in 2007. Without the aforementioned non-cash expenses of $0.72 million, net income would have been $1.83 million, an increase of 185.9% over that of 2007. Further, to be comparable to 2007, without the $1.47 million expenses related to public company operations, net income would have been $2.58 million, representing a growth of 303.1% over that of 2007.
Fourth Quarter of 2008 Financial Results
Revenue for the fourth quarter of 2008 increased by 67.1% year over year to a record $7.20 million from $4.31 million in Q4 2007.
"I am very proud to have achieved another record year of growth in 2008," commented Mr. Qinghuan Wu, Chairman and CEO of China Energy Recovery. "In 2008, we continued to strengthen our leadership position in supplying superior energy recovery systems to the chemical and paper-making industries in China. Going public on an American exchange in 2008 helped us open a new era for the company and has helped increase the awareness for the company internationally. Though there will continue to be challenges in 2009 resulting from the global economic recession, we believe the company will continue to grow and capitalize on market opportunities created by the increasing demands for greater energy efficiency and global environmental protection initiatives. The market recognition for our superior design and engineering capabilities coupled with our expertise in waste energy recovery has helped us achieve a well-earned reputation for quality -- something we've endeavored for since the company's founding. We intend to continue to strengthen our core competencies, streamline our business model and expand into other market segments such as cement manufacturing. We will also continue to seek opportunities to expand our manufacturing capacity for our core products. All these efforts will lay a solid foundation for the sustained, long-term growth for the company in order to maintain a reputation as a world leader in waste energy recovery."
For more detailed financial information about CER, please refer to CER's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on March 30, 2009.
What is Waste Heat Energy Recovery?
Industrial facilities release significant amounts of excess heat into the atmosphere in the form of hot exhaust gases or high-pressure steam. Energy recovery is the process of recovering vast amounts of that wasted energy and converting it into usable heat energy or electricity, dramatically lowering energy costs. Energy recovery systems are also capable of capturing harmful pollutants that would otherwise be released into the environment. It is estimated that if energy currently wasted by all the U.S. industrial facilities could be recovered, it could produce power equivalent to 20% of U.S. electricity generation capacity without burning any additional fossil fuel, and could help many industries to meet stringent environmental regulations.
About China Energy Recovery, Inc.
CER is an international leader in designing, manufacturing and installing waste heat energy recovery systems which provide facilities with greater energy efficiency. The company's primary focus is on the Chinese market. CER's technology captures industrial waste energy to produce low-cost electrical power, enabling industrial manufacturers to reduce their energy costs, shrink their emissions footprint, and generate sellable emissions credits. CER has deployed its systems throughout China and in such international markets as Egypt, Korea, Vietnam and Malaysia. CER focuses on numerous industries in which a rapid payback on invested capital is achieved by its customers, including: chemical, paper manufacturing, refining (including methanol refining), etc. CER continues to invest in R&D and plans to build China's first state-of-the-art energy recovery system research and fabrication facility to allow it to meet the increased demand for its products and services. For more information on CER, please visit: http://www.chinaenergyrecovery.com/s/Home.asp . Information on CER's website does not comprise a part of this press release.
Forward-Looking Statement Disclaimer
This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in the press release that address activities, events or developments that CER believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that CER believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of CER and may not materialize, including, without limitation, the efficacy and market acceptance of CER's products and services, CER's ability to execute on its business plan and strategies and CER's ability to successfully complete orders and collect revenues therefrom. Investors are cautioned that any such statements are not guarantees of future performance. Actual results or developments may differ materially from those projected in the forward-looking statements as a result of many factors. Furthermore, CER does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law. The contents of this release should be considered in conjunction with the warnings and cautionary statements contained in CER's filings with the Securities and Exchange Commission, including CER's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2009.
CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
2008 2007
ASSETS
CURRENT ASSETS:
Cash $6,136,403 $306,150
Restricted cash 597,949 89,115
Notes receivable 120,749 351,799
Accounts receivable, net of allowance
for doubtful accounts of $151,094 and
$237,475 as of December 31, 2008 and
2007, respectively 4,935,142 577,005
Accounts receivable - related party 1,006,060 572,036
Inventories 7,774,775 5,262,329
Costs and estimated earnings in
excess of billings -- 1,155,909
Other receivables 98,271 37,852
Advances on inventory purchases 1,044,807 1,995,345
Total current assets 21,714,156 10,347,540
EQUIPMENT, net 850,888 649,392
OTHER ASSETS:
Long term accounts receivable,
retainage 377,368 588,433
Due from shareholder -- 463,663
Total other assets 377,368 1,052,096
Total assets $22,942,412 $12,049,028
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,331,293 $2,196,508
Other payables 466,392 275,591
Other payables - related party 65,078 60,819
Accrued liabilities 21,228 27,851
Customer deposits 7,044,234 8,052,570
Taxes payable 2,282,621 719,132
Deferred revenue 1,518,431 930,546
Deferred revenue - related party 208,270 --
Short term loans payable 381,420 --
Total current liabilities 15,318,967 12,263,017
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized,
714,963 and 0 issued and
outstanding as of December 31,
2008 and 2007 715 --
Common stock, $0.001 par value,
100,000,000 shares authorized,
29,912,573 issued and outstanding
as of December 31, 2008 20,757,090
issued and outstanding as of
December 31, 2007 29,913 20,757
Paid-in-capital 7,645,404 870,787
Accumulated deficit (363,147) (1,270,165)
Statutory reserves 408,403 204,758
Accumulated other comprehensive
loss (97,843) (40,126)
Total shareholders' equity 7,623,445 (213,989)
Total liabilities and
shareholders' equity $22,942,412 $12,049,028
CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
REVENUES
Third parties $19,793,175 $10,923,338
Related party 3,384,900 923,554
Total revenue 23,178,075 11,846,892
COST OF SALES
Third parties 16,155,562 8,929,769
Related party 1,951,549 788,655
Total cost of sales 18,107,111 9,718,424
GROSS PROFIT 5,070,964 2,128,468
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,463,682 1,365,321
INCOME FROM OPERATIONS 1,607,282 763,147
OTHER INCOME (EXPENSE), NET:
Non-operating income, net 126,512 11,259
Interest expense, net (57,411) (42,446)
Total other income (expense), net 69,101 (31,187)
INCOME FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 1,676,383 731,960
PROVISION FOR INCOME TAXES 565,720 91,041
NET INCOME 1,110,663 640,919
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment (57,717) (201,560)
COMPREHENSIVE INCOME $1,052,946 $439,359
EARNINGS PER SHARE:
Basic
Weighted average number of shares 25,705,500 20,757,090
Earnings per share $0.043 $0.031
Diluted
Weighted average number of shares 27,033,819 20,757,090
Earnings per share $0.041 $0.031
CHINA ENERGY RECOVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,110,663 $640,919
Adjustments to reconcile net income
to cash provided by (used in) operating
activities:
Depreciation 92,885 51,715
Change in allowance for
uncollectible accounts 55,549 164,445
Common stock issued for services 469,631 --
Stock based compensation 193,222 --
Value of warrants related to
convertible notes 52,279 --
Loss on fixed assets disposal 13,186 --
Change in operating assets and
liabilities
Notes receivable 251,239 (201,663)
Accounts receivable (4,298,231) 1,390,834
Accounts receivable - related
party (387,120) (549,380)
Inventories (2,106,701) (2,296,726)
Costs and estimated earnings in
excess of billings 1,215,348 (1,110,127)
Other receivables (57,199) 65,151
Advances on inventory purchases 1,072,567 (1,229,206)
Long term accounts receivable,
retainage 221,919 (565,128)
Other assets (2,018) 1,211
Accounts payable 946,615 207,593
Other payables 168,521 (4,565)
Other payables - related party -- (370,764)
Accrued liabilities (8,225) 23,899
Customer deposits (1,544,864) 5,005,764
Customer deposits - related party -- (190,186)
Taxes payable 1,486,832 137,740
Deferred revenue 718,290 163,590
Net cash provided by (used in)
operating activities (335,612) 1,335,116
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase equipment (246,196) (246,264)
Repayment of loans to shareholder 487,507 (707,003)
Net cash provided by (used in)
investing activities 241,311 (953,267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in restricted cash (587,555) (89,115)
Cash received from re-organization 119 --
Capital contribution -- 67,150
Proceeds from issuing preferred
stock, net of offering costs 6,619,278 --
Shareholder distribution from VIE (519,744) (210,756)
Cash proceeds from short term bank
loans 361,920 282,040
Repayment of short term bank loans -- (298,980)
Net cash provided by (used in)
financing activities 5,874,018 (249,661)
EFFECTS OF EXCHANGE RATE CHANGE IN
CASH 50,536 26,357
INCREASE IN CASH 5,830,253 158,545
CASH, beginning 306,150 147,605
CASH, ending $6,136,403 $306,150
For more information, please contact:
Media
Sean Mahoney
Tel: +1-310-867-0670
Email: seamah@gmail.com
Investor Relations
Jim Blackman
Tel: +1-713-256-0369
Email: jim@prfmonline.com
