-- $18.4 million of revenue and $3.8 million of net income for Q3 2009, up
333% and 1,045%, respectively, year-over-year
-- Fully diluted EPS of $0.08 for Q3 and $0.19 for the year up-to-date, up
from $0.01 and net loss of $0.14 per share in the same period last year
-- As of Q3, reached the guidance for the entire 2009 fiscal year in
revenue and net income
XI’AN, China, Nov. 16 /PRNewswire-Asia-FirstCall/ -- China Recycling Energy Corp. (OTC Bulletin Board: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, announced on November 16, 2009 its unaudited financial results for the third quarter of 2009.
Highlights
For the three months ended September 30, 2009:
-- Revenue grew by 333% to $18.4 million in the three months ended
September 30, 2009 from $4.3 million in the three months ended
September 30, 2008.
-- Income from operations grew by 468% to $4.7 million in the three months
ended September 30, 2009 from $0.8 million in the three months ended
September 30, 2008.
-- Net income grew by 10.4 times to $3.8 million for the three months
ended September 30, 2009 from approximately $333,000 for the three
months ended September 30, 2008.
-- Fully diluted EPS of $0.08 for the three months ended September 30,
2009 versus $0.01 for the three months ended September 30, 2008. An
increase of 713%, year-over-year.
For the nine months ended September 30, 2009:
-- Revenue grew by 393% to $33.9 million in the nine months ended
September 30, 2009 from $6.9 million in the nine months ended September
30, 2008.
-- Income from operations grew by 667% to $9.6 million in the nine months
ended September 30, 2009 from $1.2 million in the nine months ended
September 30, 2008.
-- Net income was $8.1 million for the nine months ended September 30,
2009 versus net loss of $4.3 million for the nine months ended
September 30, 2008.
-- Fully diluted EPS of $0.19 for the nine months ended September 30, 2009
versus net loss of $0.14 per share in the nine months ended September
30, 2008.
"We are very pleased to announce a record quarter for CREG, based on a combination of product sales, delivery of systems servicing a new customer and increasing recurring revenues from our portfolio of existing waste-energy recovery projects," Mr. Guohua Ku, Chairman and CEO of CREG, said. "This quarter we have both expanded the scope of our business industry sector as well as taken on larger projects. We are fully confident that we will continue to be a leader in build, operate and transfer (BOT) energy recovery projects in China and will deliver increasing value to our customers and shareholders."
Financial Results For Three Months Ended September 30, 2009
For the third quarter of 2009, CREG generated revenue of $18.4 million, a 333% increase from $4.3 million in the third quarter of 2008 and a 65% growth from $11.1 million in the second quarter of 2009. CREG sold one energy recycling system in the third quarter.
Gross profit was $4.2 million in the third quarter of 2009, compared with $1.3 million in the third quarter of 2008 and $2.7 million in the second quarter of 2009. Gross margin was 23.0%, compared to 24.2% in the second quarter of 2009 and 30.1% in the third quarter of 2008. The change in gross margin was primarily because of the higher gross profitability of the operational rental business, which the Company operated in the second quarter of 2008 but ended in the second quarter of 2009, compared with only straight product sales in the third quarter of 2009. CREG did not record any product sales in the third quarter of 2008.
Interest income on sales-type leases in the third quarter of 2009 was $1.8 million, up 57.2% over $1.10 million in the second quarter of 2009 and 209.3% higher than $0.6 million in the third quarter of 2008. The growth from last year was primarily due to the increased interest income from new energy recovery systems that have been completed.
General and administrative expenses increased to $1.4 million in the third quarter of 2009 from $0.6 million in the second quarter of 2009 and $1.0 million in the third quarter of 2008. The increase was mainly due to the overhead associated with the growth of CREG’s portfolio of projects. It is inclusive of approximately $0.7 million of non-cash compensation expenses amortized in connection with our ESOP plan.
Income from operations in the third quarter of 2009 was $4.7 million compared with $3.3 million in the second quarter of 2009 and $0.8 million in the third quarter of 2008.
Net income was $3.8 million in the third quarter of 2009, compared with $3.3 million in the second quarter of 2009 and $0.33 million in the third quarter of 2008. GAAP diluted EPS was $0.08 in the third quarter of 2009, compared with $0.07 in the second quarter of 2009 and $0.01 in the third quarter of 2008.
Financial Results For Nine Months Ended September 30, 2009
For the nine months ended September 30, 2009, CREG had total revenue of $33.9 million, a 393% increase from the $6.9 million in revenue recorded in the same period of 2008. Of the total revenue, product sales revenue was $27.9 million and rental income from operational leases was $5.9 million. In the same period of 2008, CREG had rental income of $6.9 million.
Gross profit for the nine months ended September 30, 2009 was $8.2 million, 299% higher than the $2.1 million in the same period of 2008. Gross margin was 24.3% for the nine months ended September 30, 2009 versus 30.0% the same period of 2008. The change in gross margin was primarily due to the higher profitability of operational rental business in the year ago period, which ended in the second quarter of 2009.
For the nine months ended September 30, 2009, interest income from sales-type leases was $4.1 million, a 140% increase from $1.7 million in the same period of 2008. The growth was primarily due to the expansion of the sales type lease portfolio that began generating steady interest income this year.
General and administrative expenses were $2.7 million for the nine months ended September 30, 2009, an increase of 7% over $2.5 million over the same period last year. Inclusive of $1.1 million non-cash ESOP compensation expense and regardless of rapid business expansion, G & A expenses were largely contained primarily due to efficient control of employee compensation and marketing.
For the nine months ended September 30, 2009, income from operations was $9.6 million compared with $1.2 million in the same period of 2008, resulting in a 677% increase year-over-year.
For the nine months ended September 30, 2009, GAAP net income was $8.1 million compared with a net loss of $4.3 million in the same period of 2008. For the nine months ended September 30, 2009, GAAP diluted EPS was $0.19, compared with a diluted loss per share of $0.14 in the same period of 2008.
As of September 30, 2009, cash and cash equivalents, inclusive of restricted cash, were $10.1 million, compared with $7.3 million at year-end 2008. Total investments in sales-type leases were $43.2 million, compared with $16.8 million as of the end of 2008. Total shareholders’ equity was $43.9 million, compared with $32.4 million at December 31, 2008.
Net cash provided by operating activities was $12.4 million in the nine months of 2009, compared with net cash outflow from operations of $4.4 million in the same period of 2008.
Business Guidance
For the nine months ended Sept 30, 2009, CREG recorded $ 33.9 million in sales revenues and an additional $4.1 million revenue in interest income on sale-type leasing, with a result of $8.1 million in net income. During the first nine months of 2009, the company has reached its previous guidance for the entire 2009 fiscal year, which was in the range of $33 million to $36 million, with net income, excluding non-cash charges, of approximately $8 million.
Subsequent Events
On October 26, 2009, CREG’s subsidiaries, Xi’an TCH and Erdos TCH (collectively "the Borrower") jointly entered into a Non Promissory Short Term Revolving Financing Agreement, dated and effective from October 12, 2009, with Citi Bank (China) Co., Ltd., Shanghai Branch (the "Lender") for a line of credit amount up to RMB20 million.
On November 6, 2009, the Company’s Board approved an increase in the size of the Board of Directors from three members to six members and the appointment of Mr. Sean Shao, Mr. Julian Ha and Mr. Timothy Driscoll as new members of the Board. Mr. Shao is expected to chair the Audit Committee of the Board and serve on the Nominating Committee. Mr. Ha is expected to chair the Compensation Committee of the Board and serve on the Audit Committee of the Board. Mr. Driscoll is expected to chair the Nominating Committee of the Board and serve on the Compensation Committee of the Board.
About China Recycling Energy Corp.
China Recycling Energy Corp. (OTCBB: CREG.OB; "CREG" or "the Company") is based in Xi’an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1% of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The management and engineering teams have over 20 years of experience in industrial energy recovery in China.
For more information about CREG, please visit http://www.creg-cn.com .
Safe Harbor Statement
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:
In China:
Mr. Leo Wu
Investor Relations
China Recycling Energy Corp.
Email: tch@creg-cn.com
In USA:
Mr. Howard Gostfrand
American Capital Ventures, Inc.
Email: hg@amcapventures.com
Financial Statements Attached
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2009 2008
(Unaudited) (Restated)
ASSETS
CURRENT ASSETS
Cash & cash equivalents $5,683,300 $7,267,344
Restricted cash 4,395,153 --
Investment in sales type leases,
net 4,212,046 1,970,591
Interest receivable on sales
type leases 461,737 82,406
Prepaid expenses -- 3,849,087
Other receivables 248,037 102,850
Inventory -- 10,534,633
Total current assets 15,000,273 23,806,911
NON-CURRENT ASSETS
Investment in sales type leases,
net 39,012,834 14,837,879
Advance for equipment -- 2,642,889
Property and equipment, net 90,860 95,359
Construction in progress 9,432,787 3,731,016
Intangible assets, net -- 3,482
Total non-current assets 48,536,480 21,310,625
TOTAL ASSETS $63,536,753 $45,117,536
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $2,035,574 $1,186,902
Notes payable - bank acceptances 1,466,467 --
Short term loan 2,928,686 --
Unearned revenues -- 658,415
Tax payable 220,732 1,313,949
Accrued liabilities and other
payables 2,977,962 3,528,527
Convertible notes 8,000,000 5,000,000
Accrued interest on convertible
notes 228,676 168,494
Total current liabilities 17,858,098 11,856,287
DEFERRED TAX LIABILITY, NET 1,732,129 823,407
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value;
100,000,000 shares authorized,
38,778,035 and 36,425,094 shares
issued and outstanding as of
September 30, 2009 and December
31, 2008, respectively 38,778 36,425
Additional paid in capital 37,074,978 30,475,360
Statutory reserve 2,349,198 1,319,286
Accumulated other comprehensive
income 3,617,330 3,582,587
Accumulated deficit 613,562 (2,991,995)
Total Company stockholders’
equity 43,693,846 32,421,663
Noncontrolling interest 252,679 16,179
Total equity 43,946,525 32,437,842
TOTAL LIABILITIES AND EQUITY $63,536,753 $45,117,536
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS Of OPERATIONS
(unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2009 2008 2009 2008
(Restated) (Restated)
Revenue
Sales of
products $27,938,697 $-- $18,425,620 $--
Rental income 5,946,892 6,876,223 -- 4,259,807
Total revenue 33,885,589 6,876,223 18,425,620 4,259,807
Cost of sales
Cost of
products 21,497,172 -- 14,179,421 --
Rental
expense 4,148,572 4,810,011 -- 2,977,402
Total cost of
sales 25,645,744 4,810,011 14,179,421 2,977,402
Gross profit 8,239,845 2,066,212 4,246,199 1,282,405
Interest income
on sales-type
leases 4,117,305 1,716,544 1,783,833 576,817
Total operating
income 12,357,150 3,782,756 6,030,032 1,859,222
Operating
expenses
General and
administrative
expenses 2,730,971 2,543,563 1,375,230 1,039,784
Total operating
expenses 2,730,971 2,543,563 1,375,230 1,039,784
Income from
operations 9,626,179 1,239,193 4,654,802 819,438
Non-operating
income (expenses)
Interest income 29,702 -- 29,702 (57,029)
Interest
expense (320,546) (4,706,567) 113,222 --
Other
expense (68,842) (2,239) (66,078) (1,238)
Other income -- 1,621 -- 17
Exchange loss (2,718) (81,969) (329) (1,524)
Total non-
operating
income
(expenses) (362,405) (4,789,154) 76,516 (59,774)
Income (loss) before
income tax 9,263,774 (3,549,961) 4,731,318 759,664
Income tax expense 1,166,684 796,458 941,962 427,960
Net income (loss)
from operations 8,097,089 (4,346,419) 3,789,355 331,704
Less: Net income
(loss) attributable
to noncontrolling
interest (10,898) 83 (7,740) 27
Net income (loss) 8,107,987 (4,346,502) 3,797,095 331,677
Other comprehensive
item
Foreign currency
translation
gain (loss) 34,743 1,918,236 35,835 807,806
Comprehensive
income (loss) $8,142,730 $(2,428,266) $3,832,930 $1,139,483
Basic weighted
average shares
outstanding 37,829,964 30,642,187 38,778,035 36,425,094
Diluted weighted
average shares
outstanding ** 43,915,609 34,256,352 47,900,894 37,404,892
Basic net earnings
(loss) per share * $0.21 $(0.14) $0.10 $0.01
Diluted net earning
(loss) per share * $0.19 $(0.14) $0.08 $0.01
* Interest expense on convertible notes are added back to net income for
the computation of diluted EPS.
* Basic and diluted loss per share is the same due to anti-dilutive
feature of the securities.
** Diluted weighted average shares outstanding includes estimated shares
upon conversion of the Second Note issued on April 29, 2008 with
conversion price contingent upon future net profits.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2009 2008
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including
noncontrolling interest $8,097,089 $(4,346,419)
Adjustments to reconcile net
income (loss) including
noncontrolling interest to
net cash provided by(used in)
operating activities:
Depreciation and amortization 23,155 10,848
Amortization of discount related
to conversion feature of
convertible note -- 4,684,932
Stock option compensation expense 1,129,328 1,129,151
Accrued interest on convertible
notes 60,182 42,466
Changes in deferred tax 1,731,344 357,751
(Increase) decrease in current
assets:
Interest receivable on
sales type leases (379,331) 65,045
Advance to suppliers
and prepaid expenses 3,828,438 (6,567,350)
Other receivables (113,744) (49,847)
Increase (decrease) in current
liabilities:
Accounts payable 847,314 (1,217,170)
Unearned revenue (658,655) --
Tax payable (1,917,728) 336,805
Accrued liabilities and
other payables (260,167) 1,097,127
Net cash provided by (used in)
operating activities 12,387,225 (4,456,661)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash (4,393,159) (823,428)
Investment in sales
type leases (9,484,917) 734,692
Increase investment in
subsidiary (16,100) --
Acquisition of property
and equipment (15,096) (113,906)
Construction in progress (8,255,441) (9,986,879)
Net cash used in investing
activities (22,164,713) (10,189,521)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,000,000 9,032,258
Convertible notes 3,000,000 5,000,000
Short-term bank loan 2,927,358 429,615
Repayment to management -- (74,699)
Cash contribution from
noncontrolling interest 263,439 --
Net cash provided by financing
activities 8,190,797 14,387,174
EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH
EQUIVALENTS 2,647 330,608
NET INCREASE IN CASH & CASH EQUIVALENTS (1,584,044) 71,600
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 7,267,344 1,634,340
CASH & CASH EQUIVALENTS, END OF PERIOD $5,683,300 $1,705,940
Supplemental Cash flow data:
Income tax paid $1,307,406 $152,049
Interest paid $319,086 $--
