XI'AN, China, May 15, 2012 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (PINK: CHNG), a leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, today announced its financial results for the first quarter ended March 31, 2012.
First Quarter 2012 Results
Revenue in the first quarter of 2012 increased by 33.9% to $32.28 million from $24.11 million in the first quarter of 2011, driven by our LNG production facility in Jingbian County, Shaanxi Province started operations , and the increase in the number of residential and commercial pipeline customers from 115,787 to 117,270 over the period. Sales revenue of natural gas grew by 44.5% year-over-year to $29.40 million, from $20.35 million in the first quarter of 2011. Gasoline revenue in the first quarter of 2012 decreased by 36.8% to $0.83 million, from $1.31 million in the same period of the prior year, mainly because 3 gasoline stations were closed during the second quarter and fourth quarter of 2011. Installation and automobile conversion services revenue decreased by 16.4% year-over-year to $2.05 million, from $2.45 million a year ago. In the first quarter of 2012, sales of natural gas, gasoline, and installation and automobile conversion services contributed 91.1%, 2.6%, and 6.3% of total revenue, respectively.
Gross profit in the first quarter of 2012 increased 16.9% to $11.36 million from $9.72 million in the same period of the prior year. Gross margin in the first quarter of 2012 was 35.2%, compared to 40.3% a year ago. Gross margin decreased primarily due to the current lower gross margin level of our LNG business, as compared to the gross margins of those business lines making greatest contribution to revenue.
Operating income in the first quarter of 2012 was $3.70 million, an increase of 14.6% year-over-year from $3.23 million, primarily attributable to the realization of revenue and gross profit of LNG, which started in July 2011..
Income tax expense was $0.79 million at an effective tax rate of 28.9%, as compared to $0.96 million at an effective tax rate of 27.8% in the first quarter of 2011. The decrease was primarily due to lower income before income tax for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The effective income tax rate increased from 27.8% to 28.9% over this period, primarily attributable to foreign currency exchange loss related to the Abax Senior Notes, which was not subject to income tax because we had incurred a net operating loss for income tax purpose for the three months ended March 31, 2012.
Net income in the first quarter of 2012 decreased by 21.6% to $1.95 million, or $0.10 per diluted share, from $2.49 million, or $ 0.12 per diluted share, in the first quarter of 2011.
As of March 31, 2012, the Company had $7.01 million of cash and cash equivalents on hand, compared to $9.62 million of cash and cash equivalents as of December 31, 2011. The decrease was primarily attributable to the construction of the LNG plant and other projects, and the repayment of the loans from Shanghai Pudong Development Bank and of the principal of the Abax Senior Notes.
Net cash provided by operating activities was $7.42 million for the first quarter of 2012, as compared to net cash provided by operations of $2.46 million for the first quarter of 2011. The increase was primarily due to the decrease in prepaid expense and other current assets, and increase in unearned revenue, and adjustments for non-cash expense items, including depreciation and amortization expenses, offset mainly by the increase in advances to suppliers and in other receivables.
About China Natural Gas, Inc.
China Natural Gas (http://www.naturalgaschina.com ) transports and sells natural gas to vehicular fueling terminals, as well as commercial, industrial and residential customers through its distribution networks in China's Shaanxi and Henan Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 25 CNG fueling stations in Shaanxi Province, 12 CNG fuelling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) distribution and sales of CNG through Company-owned CNG fueling stations serving hybrid (natural gas/gasoline) powered vehicles; (2) installation, distribution and sales of piped natural gas to residential and commercial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) distribution and sales of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles at its automobile conversion workshops.
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. For example, statements about the future plans and goals of the JV with CNPC and its prospects are forward looking and subject to risks. China Natural Gas, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statements on Forms S-1 and S-3, in each case as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.
CHINA NATURAL GAS, INC. AND SUBSIDIARIES | ||||||||
March 31, | December 31, | |||||||
2012 | 2011 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 7,007,512 | $ | 9,622,883 | ||||
Restricted cash | 792,000 | - | ||||||
Accounts receivable, net | 1,780,849 | 2,997,845 | ||||||
Other receivables, net | 1,457,428 | 540,646 | ||||||
Employee advances | 375,733 | 285,270 | ||||||
Inventories | 1,827,300 | 1,938,754 | ||||||
Advances to suppliers | 7,522,638 | 4,540,139 | ||||||
Prepaid expense and other current assets | 1,356,542 | 4,470,687 | ||||||
Total current assets | 22,120,002 | 24,396,224 | ||||||
Investment in unconsolidated joint ventures | 1,584,000 | 1,574,000 | ||||||
Property and equipment, net | 190,730,403 | 174,097,754 | ||||||
Construction in progress | 40,193,213 | 45,882,320 | ||||||
Deferred financing cost, net | 414,876 | 517,334 | ||||||
Goodwill | 633,730 | 629,729 | ||||||
Other intangible assets | 20,256,737 | 18,910,244 | ||||||
Prepaid expenses and other assets | 4,383,267 | 10,976,203 | ||||||
TOTAL ASSETS | $ | 280,316,228 | $ | 276,983,808 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Senior notes- current maturities | $ | 13,164,008 | $ | 9,671,682 | ||||
Current portion of bank loan payable | 5,544,000 | 4,722,000 | ||||||
Accounts payable and accrued liabilities | 8,756,354 | 7,694,423 | ||||||
Other payable - related party | 1,734,633 | 787,000 | ||||||
Short-term borrowing - related party | 2,679,945 | 1,359,945 | ||||||
Unearned revenue | 5,664,122 | 4,280,594 | ||||||
Accrued interest | 544,726 | 1,029,431 | ||||||
Taxes payable | 2,055,813 | 2,626,271 | ||||||
Total current liabilities | 40,143,601 | 32,171,346 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Senior notes, net of current portion | 19,746,011 | 25,791,151 | ||||||
Bank loan payable, net of current portion | 7,920,000 | 9,444,000 | ||||||
Borrowings - related party | - | 1,320,000 | ||||||
Warrants liability | 17,500,000 | 17,500,000 | ||||||
Total long-term liabilities | 45,166,011 | 54,055,151 | ||||||
Total liabilities | 85,309,612 | 86,226,497 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Preferred stock, par value $0.0001 per share, 5,000,000 authorized, | - | - | ||||||
Common stock, par value $0.0001 per share, 45,000,000 authorized, | 2,145 | 2,145 | ||||||
Additional paid-in capital | 83,057,523 | 82,909,485 | ||||||
Accumulated other comprehensive income | 21,576,294 | 19,817,493 | ||||||
Statutory reserves | 10,529,185 | 10,124,710 | ||||||
Retained earnings | 79,674,808 | 77,903,478 | ||||||
Total China Natural Gas, Inc. stockholders' equity | 194,839,955 | 190,757,311 | ||||||
Noncontrolling interests | 166,661 | - | ||||||
Total stockholders' equity | 195,006,616 | 190,757,311 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 280,316,228 | $ | 276,983,808 | ||||
CHINA NATURAL GAS, INC. AND SUBSIDIARIES | ||||||||
For the Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
Revenue | ||||||||
Natural gas | $ | 29,399,687 | $ | 20,347,829 | ||||
Gasoline | 825,895 | 1,307,174 | ||||||
Installation and other | 2,051,736 | 2,453,105 | ||||||
32,277,318 | 24,108,108 | |||||||
Cost of revenue | ||||||||
Natural gas | 19,274,859 | 12,099,451 | ||||||
Gasoline | 788,144 | 1,224,724 | ||||||
Installation and other | 852,245 | 1,063,632 | ||||||
20,915,248 | 14,387,807 | |||||||
Gross profit | 11,362,070 | 9,720,301 | ||||||
Operating expenses | ||||||||
Selling | 4,950,800 | 3,579,921 | ||||||
General and administrative | 2,711,646 | 2,910,971 | ||||||
7,662,446 | 6,490,892 | |||||||
Income from operations | 3,699,624 | 3,229,409 | ||||||
Other income (expense) | ||||||||
Interest income | 10,746 | 6,649 | ||||||
Interest expense | (432,037) | (4,668) | ||||||
Other income (expense), net | (33,093) | 96,956 | ||||||
Change in fair value of warrants | (83) | 116,180 | ||||||
Foreign currency exchange loss | (505,940) | (3,042) | ||||||
(960,407) | 212,075 | |||||||
Income before income tax | 2,739,217 | 3,441,484 | ||||||
Provision for income tax | 791,471 | 955,653 | ||||||
Net income | 1,947,746 | 2,485,831 | ||||||
Less: Loss attributable to noncontrolling interests | (228,059) | - | ||||||
Net income attributable to China Natural Gas, Inc. | 2,175,805 | 2,485,831 | ||||||
Other comprehensive income | ||||||||
Foreign currency translation gain | 1,758,800 | 1,448,655 | ||||||
Comprehensive income | $ | 3,934,605 | $ | 3,934,486 | ||||
Weighted average shares outstanding | ||||||||
Basic | 21,458,654 | 21,321,904 | ||||||
Diluted | 21,458,654 | 21,358,755 | ||||||
Earnings per share | ||||||||
Basic | $ | 0.10 | $ | 0.12 | ||||
Diluted | $ | 0.10 | $ | 0.12 | ||||
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
| ||||||||
For the Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income attributable to China Natural Gas, Inc. | $ | 2,175,805 | $ | 2,485,831 | ||||
Add: Loss attributable to noncontrolling interests | (228,059) | - | ||||||
Net income | 1,947,746 | 2,485,831 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,411,668 | 1,821,365 | ||||||
(Recovery of) Provision for doublful accounts | 284,740 | 264,367 | ||||||
Stock-based compensation | 148,038 | 160,897 | ||||||
Change in fair value of warrants | 83 | (116,180) | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable | 1,272,022 | (598,060) | ||||||
Other receivables | (1,196,797) | 15,304 | ||||||
Employee advances | (88,962) | 35,837 | ||||||
Inventories | 124,084 | (464,199) | ||||||
Advances to suppliers | (2,961,113) | (673,722) | ||||||
Prepaid expense and other current assets | 3,195,216 | (580,447) | ||||||
Accounts payable and accrued liabilities | 997,587 | (97,201) | ||||||
Unearned revenue | 1,359,757 | (569,659) | ||||||
Accrued interest | (484,705) | (141,855) | ||||||
Taxes payable | (588,625) | 915,305 | ||||||
Net cash provided by operating activities | 7,420,739 | 2,457,583 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payment for acquisition of property and equipment | (3,192,954) | (105,124) | ||||||
Additions to construction in progress | (4,744,279) | (4,845,643) | ||||||
Prepayment on long-term assets | 4,962,691 | (687,313) | ||||||
Payment for acquisition of business | (657,421) | - | ||||||
Payment for intangible assets | (1,506,029) | (71,138) | ||||||
Net cash used in investing activities | (5,137,992) | (5,709,218) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from short-term debt and other payable, related parties | - | 2,081,000 | ||||||
Repayment of long-term debt | (794,000) | - | ||||||
Repayment of senior notes | (3,333,334) | - | ||||||
Increase in restricted cash | (794,000) | - | ||||||
Net cash (used in) provided by financing activities | 4,921,334 | 2,081,000 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 23,216 | 55,550 | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (2,615,371) | (1,115,085) | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 9,622,883 | 10,046,249 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 7,007,512 | $ | 8,931,164 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid, including capitalized interest | $ | 1,194,334 | $ | 1,406,911 | ||||
Income taxes paid | $ | 1,143,667 | $ | - | ||||
Non-cash transactions for investing and financing activities: | ||||||||
Construction materials transferred to Construction in progress | $ | 67,185 | $ | 4,960,793 | ||||
Construction in progress transferred to property and equipment | $ | 15,506,551 | $ | - | ||||
Advances to suppliers transferred to construction in progress | $ | - | $ | 7,480,412 | ||||
Capitalized interest - amortization of discount of notes payable and issuance cost | $ | 1,016,672 | $ | 1,016,146 | ||||
Other assets transferred to construction in progress | $ | 671,615 | $ | 545,354 | ||||
For more information, please contact:
China Natural Gas, Inc.
Zhaoyang Qiao, CFO
Phone: +86-29-8832-7391
Email: qiaochaoyang@naturalgaschina.com
Jackie Shi
Investor Relations Director
Phone: +86-29-8832-3325 x922
Cell: +86-139-9287-9998
Email: yjshi@naturalgaschina.com
