Revenues Increase 134%, Fully Diluted EPS up 150%
XI'AN, China, May 13 /PRNewswire-Asia-FirstCall/ -- China Recycling Energy Corp. (Nasdaq: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its first quarter 2010 financial results.
Highlights:
-- Revenues grew by 134% to $10.1 million for the quarter ended March 31,
2010 from $4.3 million for the quarter ended March 31, 2009.
-- Income from operations grew by 116% to $5.4 million for the quarter
ended March 31, 2010 from $2.5 million for the quarter ended March 31,
2009.
-- Net income grew to $2.2 million for the quarter ended March 31, 2010
from $1.1 million for the quarter ended March 31, 2009.
-- Fully diluted earning per share ("EPS") of $0.05 for the quarter ended
March 31, 2010 compared to $0.02 for the quarter ended March 31, 2009.
-- On adjusted Non-GAAP measures, as defined as below, Non-GAAP's net
income grew to $3.9 million, or Non-GAAP's fully diluted EPS of $0.08,
for the quarter ended March 31, 2010 compared to $2,1 million, or fully
diluted EPS of $0.05, for the same period of 2009.
Summary of Financial Results
(In '000s of U.S. Dollars, For the period For the period
except per share data) ending ending
March 31, 2010 March 31, 2009
Revenue $10,125 $4,323
Gross Profit 2,327 1,301
Operating Income 5,422 2,500
Income before Tax (IBT) 3,622 1,644
Net Income 2,191 1,076
Non-GAAP net income (1) 3,924 2,138
Diluted EPS $0.05 $0.02
Non-GAAP diluted EPS (1) (2) $0.08 $0.05
(1) CREG provides net income and earnings per share on a non-GAAP basis
that excludes non-cash, share-based compensation expense and non-cash
interest expense on the amortization of the beneficial conversion
feature for the convertible notes and non-cash deferred income tax
expenses, as described below, to enable investors to better assess the
Company's operating performance. The non-GAAP measures are described
below and reconciled to the corresponding GAAP measure in the section
below titled "Non-GAAP Financial Measures";
(2) Non-GAAP diluted weighted average shares outstanding were calculated
based on outstanding shares, issued options, and estimated shares
under the assumption that they would be converted from our convertible
debentures based on CREG's 2009's net income.
"We are off to a very strong start for 2010 and are on track with our financial projections. All of our projects are currently on plan. We are encouraged by the active market in China for our energy savings and emissions reducing products and services, and we continue to pursue new proposals and opportunities," commented, Mr. Guohua Ku, Chairman and CEO of CREG.
Financial Results for the First Quarter Ended March 31, 2010
Net sales for the first quarter of 2010 were $10.13 million compared to net sales for the first quarter of 2009 of $4.32 million, an increase in revenue of $5.80 million. The increase was due to the completion and sale of the second of two 9MW capacity power stations in the Erdos Phase I project through a sales-type lease in March of 2010, while in same quarter of 2009, the Company only recorded rental income from our operating lease of two power generating systems, which were not renewed when they expired in April 2009.
Gross profit was $2.33 million for the first quarter of 2010 compared to $1.30 million for the comparable period in 2009, representing a gross margin of 23% and 30% for the first quarters of 2010 and 2009, respectively.
Operating income was $5.42 million for the first quarter of 2010 compared to operating income for the comparable period in 2009 of $2.50 million, an increase of $2.92 million. The growth in operating income was mainly due to the increase in interest income from selling and leasing the Company's energy saving systems through sales-type leasing. Interest income on sales-type leasing for the first quarter of 2010 was $3.09 million, an $1.89 million increase from $1.20 million for the comparable period in 2009, this increase was mainly due to increased interest income from energy saving systems that were sold and in operation since April 2009.
Operating expenses totaled $1.36 million for the first quarter of 2010 compared to $0.80 million for the comparable period in 2009, an increase of $0.56 million or 71%. The increase was due to a proportional increase in the Company's payroll, traveling and marketing expenses as a result of our increased sales and expansion of our business. In addition, the Company recorded approximately $743,000 in compensation expense for stock options and warrants during the three months ended March 31, 2010, compared to approximately $389,000 for the same period in 2009.
Net income for the first quarter of 2010 was $2.19 million compared to $1.08 million for the comparable period in 2009, an increase of $1.11 million. In addition, the Company recorded approximately $445,000 in interest expense for the first quarter of 2010 compared to no similar non-operating expense for the comparable period in 2009. The interest expense is related to the beneficial conversion feature for the convertible note issued in April 2008 with the conversion price tied to 2009 audited net profit.
For the quarter ended March 31, 2010, GAAP net income was $2.19 million compared with $1.08 million in the same period of 2009. For the year ended March 31, 2010, GAAP diluted EPS was $0.05, compared with $0.02 in the same period of 2009.
As of March 31, 2010, the Company had cash and cash equivalents of $3.24 million, compared with $1.1 million at December 31, 2009. Total investments in sales-type leases were $61.7 million, compared with $52.5 million as of the end of December 2009. Compared to $34.86 million balance at December 31, 2009, the total Construction in Progress were $30.61 million at March 31, 2010, of which, $28.68 million was paid for Phase II and Phase III of Erdos projects, and $1.93 million was for Zhongbao Binhai Project. Total shareholders' equity was $52.3 million, compared with $46.7 million at December 31, 2009.
Net cash flow provided by operating activities was $5.55 million during the first quarter of 2010, as compared to $4.43 million provided in the comparable period of 2009. The increase in net cash inflow was mainly due to the increase in net income as well as increase in accounts payable and taxes payable.
As of March 31, 2010, the Company had 38,778,035 shares of its common stock outstanding.
Non-GAAP Financial Measures
We believe that "adjusted net income" and "adjusted earnings per share" information, when taken in conjunction with reported results, provide a useful measure of financial performance since they eliminate the impact of certain non-recurring, non-cash charges. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Additionally, the non-GAAP financial measures used by CREG may not be comparable to non-GAAP financial measures used by other companies.
Adjusted Net Income and EPS For the Year Ended March 31,
2010 2009
Net Income attributed to CREG
Adjustments $2,191 $1,076
Deferred Income taxes 545 673
Interest expense related to beneficiary
conversion feature of convertible debentures 445 --
Stock based compensation Expenses 743 389
Adjusted Net Income 3,924 2,138
Diluted Weighted Average Shares
Outstanding 48,973,914 46,760,632
Adjusted EPS in Non-GAAP $0.08 $0.05
Non-GAAP net income, as defined above, was $3.9 million, for non-GAAP diluted EPS of $0.08, for the first quarter of 2010, compared with $2.1 million of Non-GAAP net income, or $0.05 in Non-GAAP diluted EPS for the same period ended in 2009.
Subsequent Events
On April 14, 2010, the Company increased the total registered capital of Erdos TCH Energy Saving Co. Ltd ("Erdos TCH"), a joint venture with Erdos Metallurgy Co. Ltd ("Erdos"), to RMB 120 million ($17.6 million), of which, RMB 112 million ($16.4 million) was contributed by the Company and RMB 8 million ($1.2 million) was from Erdos.
On April 15, 2010, Beijing Trust announced the completion of the second expansion of the Low Carbon Fortune-Energy Recycling No. 1 Collective Capital Trust Plan (the "Plan") for support of the construction of the Company's Erdos projects. The second expansion of the Plan raised RMB 93.1 million ($13.69 million). With the completion of the second expansion of the Plan, the Plan successfully completed a total capital raise of RMB 300 million ($44.12 million).
On May 5, 2010, the Company announced a banking loan agreement with Industrial Bank Co., Ltd., Xi'an Branch in a special loan of RMB 30 million ($4.4 million) designed for energy saving and emission reduction projects for a term of three years from April 6, 2010 to April 6, 2013.
2010 Business Guidance
The Company reaffirms its guidance that revenue for 2010 will be in the range of $68 million to $72 million, with net income, excluding non-cash charges, of $18 million to $20 million. These targets are based on the Company's current views on operating and market conditions, which are subject to change.
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.
China Recycling Energy Corp. (NASDAQ: 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.
Tel: +86-29-8765-1096
Email: tch@creg-cn.com
In USA:
Mr. Howard Gostfraud
American Capital Ventures, Inc.
Tel: +1-305-918-7000
Email: hg@amcapventures.com
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2010 December 31,
(Unaudited) 2009
ASSETS
CURRENT ASSETS
Cash & cash equivalents $3,235,601 $1,111,943
Restricted cash 1,728,023 1,461,659
Investment in sales type leases, net 4,949,918 4,396,395
Interest receivable on sales type leases 710,200 437,626
Prepaid expenses 228,496 445,458
Other receivables 2,528,919 1,524,949
Total current assets 13,381,157 9,378,030
NON-CURRENT ASSETS
Investment in sales type leases, net 56,772,918 48,147,738
Property and equipment, net 178,575 97,311
Construction in progress 30,606,234 34,858,845
Total non-current assets 87,557,727 83,103,894
TOTAL ASSETS $100,938,884 $92,481,924
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $5,309,895 $3,583,219
Notes payable - bank acceptances 2,094,253 1,461,659
Interest payable 385,152 --
Taxes payable 911,241 681,707
Accrued liabilities and other payables 2,607,567 2,603,016
Advance from related parties, net 1,722,288 651,255
Deferred tax liability-current 91,358 148,193
Total current liabilities 13,121,754 9,129,049
NONCURRENT LIABILITIES
Deferred tax liabilities 3,364,626 2,762,115
Convertible notes, net of discount due
to beneficial conversion feature 6,051,899 8,000,000
Accrued interest on convertible notes 475,524 353,024
Loan payable 25,577,546 25,570,429
Total noncurrent liabilities 35,469,595 36,685,568
Total liabilities 48,591,349 45,814,617
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
100,000,000 shares authorized,
38,778,035 shares issued and
outstanding as of March 31, 2010
and December 31, 2009, respectively 38,779 38,779
Additional paid in capital 41,455,703 38,319,163
Statutory reserve 3,095,223 2,497,724
Accumulated other comprehensive income 3,667,572 3,709,490
Retained earnings 3,079,374 1,485,914
Total Company stockholders' equity 51,336,651 46,051,070
Noncontrolling interest 1,010,884 616,237
Total equity 52,347,535 46,667,307
TOTAL LIABILITIES AND EQUITY $100,938,884 $92,481,924
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31,
2010 2009
Sales of systems $10,125,436 $--
Rental income -- 4,322,893
Total revenue 10,125,436 4,322,893
Cost of sales
Cost of systems 7,798,245 --
Rental expense -- 3,021,673
Total cost of sales 7,798,245 3,021,673
Gross profit 2,327,191 1,301,220
Interest income on sales-type leases 3,094,568 1,198,531
Total operating income 5,421,759 2,499,751
Operating expenses
General and administrative expenses 1,359,697 795,438
Total operating expenses 1,359,697 795,438
Income from operations 4,062,062 1,704,313
Non-operating income (expenses)
Interest income 59,139 5,013
Interest expense (567,474) (63,232)
Other income 70,925 --
Other expense (555) --
Financial Expense (1,931) (2,094)
Total non-operating expenses, net (439,896) (60,313)
Income before income tax 3,622,166 1,644,000
Income tax expense 1,036,766 568,111
Net income (loss) from operations 2,585,400 1,075,889
Less: Income attributable to
noncontrolling interest 394,441 40
Net income attributable to China
Recycling Energy Corp. 2,190,959 1,075,849
Other comprehensive item
Foreign currency translation loss
attributable to China Recycle Energy
Corp. (41,918) (29,895)
Comprehensive income attributable to
China Recycle Energy Corp. $2,149,041 $1,045,954
Comprehensive income attributable to
noncontrolling interest $396,986 $--
Basic weighted average shares
outstanding 38,778,035 36,425,094
Diluted weighted average shares
outstanding** 48,973,914 46,760,632
Basic net earnings per share $0.06 $0.03
Diluted net earnings per share* $0.05 $0.02
* Interest expense on convertible notes are added back to net income for
the computation of diluted EPS.
** Diluted weighted average shares outstanding includes estimated shares
issuable upon conversion of the Second Note issued on April 29, 2008
with conversion price that is tied to audited 2009 after-tax profits.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Income including noncontrolling interest $2,585,400 $1,075,889
Adjustments to reconcile net income
(loss) including noncontrolling
interest to net cash provided by
operating activities:
Depreciation and amortization 10,648 7,348
Amortization of discount related to
conversion feature of convertible note 444,998 --
Stock options and warrants expense 743,400 389,376
Accrued interest on convertible notes 122,500 63,013
Changes in deferred tax 544,818 673,097
(Increase) decrease in current assets:
Interest receivable on sales type lease (258,908) 211,913
Advance to supplier and prepaid expenses 217,066 2,799,495
Other receivables (1,016,977) (19,053)
Increase (decrease) in current liabilities:
Accounts payable 1,725,527 (1,960)
Taxes payable 229,324 (819,994)
Interest payable 385,118 --
Accrued liabilities and other payables (178,852) 55,144
Net cash provided by operating activities 5,554,062 4,434,268
CASH FLOWS FROM INVESTING ACTIVITIES:
Gross investment in sales type leases (1,993,833) --
Restricted cash (265,933) --
Acquisition of property & equipment (91,879) (1,843)
Construction in progress (2,907,500) (1,462,908)
Net cash used in investing activities (5,259,145) (1,464,751)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable - bank acceptances 632,132 --
Advance from related party 1,198,651 --
Net cash provided by financing activities 1,830,783 --
EFFECT OF EXCHANGE RATE CHANGE ON CASH
& CASH EQUIVALENTS (2,042) (24,103)
NET INCREASE IN CASH & CASH EQUIVALENTS 2,123,658 2,945,414
CASH & CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,111,943 7,267,344
CASH & CASH EQUIVALENTS, END OF PERIOD $3,235,601 $10,212,758
Supplemental Cash flow data:
Income tax paid $341,200 $732,561
Interest paid $-- $--
