-- First Quarter Revenue Increases 177.1% to $8.3 million
-- First Quarter Net Income Increases 41.5% to 0.4 million
-- Company Successfully Launches Its New Flat Plate Collector Production Line
-- Completes Strategic Acquisition of Shenzhen Pengsangpu
-- Company Recently Appoints New Chief Financial Officer
BEIJING, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- China Solar & Clean Energy, Inc. (OTC Bulletin Board: CSOL) (“CSOL”), a premier manufacturer and distributor of solar water heaters, renewable energy solutions, and space heating devices in the People’s Republic of China (the "PRC"), today announced its results for the first quarter of 2008 which ended March 31, 2008.
Sales for the first quarter of 2008 increased 177.1% to $8.3 million compared to $3 million for the same quarter in 2007. The significant increase was primarily due to the increase in higher margin products such as energy saving projects and heat pipe related products from the acquisition of Tianjin Huaneng which contributed approximately $5.5 million in revenues for the first quarter versus none in the year ago period. Solar Heater and Boiler division contributed $2.8 million, a decrease of 5.5%, from approximately $3 million in first quarter 2007, which resulted from lower sales volume and prices caused by increased competition and Chinese New Year Holiday. Shenzhen Pengsangpu did not contribute as the effective acquisition date was April 1, 2008.
Gross profit for the three months ended March 31, 2008 was $2.5 million, an increase of approximately 228.7% from the first quarter of 2007. Gross margins were 29.6% compared to 24.9% for the first quarter of 2008 and 2007 respectively. The improvement was a result of product and systems sales related to the acquisition of Tianjin Huaneng.
Operating expenses for the three months ended March 31, 2008 increased 164.8% to $1.3 million from $0.4 million in the same period in 2007, while selling, general and administration expenses for the period increased to approximately $1.1 million from approximately $0.44 million in the first quarter of 2007. The increase was primarily due to expenses directly related to Tianjin Huaneng which were not present in the first quarter of 2007, in addition to increased expenses for overall marketing, which includes costs for advertisement, promotion and sales force related expenses.
Operating income for the first quarter of 2008 totaled $1.2 million compared to $0.3 million for the same period in 2007, representing a 339.2% increase. Operating margins were 14.5% and 9.1% for the first quarter of 2008 and 2007, respectively. Taxes paid during the quarter were $0.34 million compared to none in the year ago period. The company paid $0.5 million in minority interests to the 49% owners of Tianjin Huaneng Energy Equipment Company which was not present in the first quarter of 2007. Net income for the 2008 first quarter increased 41.5% to $0.4 million, representing earnings of $.03 per diluted share, from $0.3 million in net income, or $.04 per diluted share during the first quarter of 2007. Calculations were based utilizing 15.3 million and 7.0 million diluted shares outstanding respectively.
During the quarter, the Company issued approximately 4.7 million shares of common stock at a purchase price of $2.40 per share, for gross proceeds of approximately $11.3 million. Additionally, the Company deposited 2 million shares of common stock (“Make Good Shares”) into escrow account for its Make Good Targets of $4.8 million and $8 million in after-tax net income for 2008 and 2009, respectively.
“We are pleased with our results despite the typical seasonal softness due to the Chinese New Year and extremely cold weather. Demand for Tianjin Huaneng energy saving equipment continued to be robust and was the principal driver in helping us achieve a 177.1% increase in revenues,” commented Mr. Deli Du, President and Chief Executive Officer. “During the quarter, we made further investments in marketing and advertising which have enabled us to gain additional market share, while helping to propagate our brand recognition which we believe will facilitate future growth. While our margins continue to be impacted by competition and pricing pressure in our core solar hot water heater market, our emphasis on Tianjin Huaneng’s high margin proprietary energy saving boilers and environmental protection equipment has improved the Company’s overall profitability. In addition, our new flat plate collector production line is fully online, something which we believe will further improve our margins and profitability through enhanced production efficiencies,” continued Mr. Du.
Balance Sheet and Cash Flow Discussion
The Company had $10.7 million and $5.5 million in cash and equivalents as of March 31, 2008 and December 31, 2007 respectively. The increase in cash was primarily due to the receipt of net proceeds of approximately $10 million from the private placement in March. Inventory increased to $4.1 million as of March 31, 2008, from $3.9 million on December 31, 2007, principally due to increased production preparing for peak season in second quarter. Accounts receivable decreased slightly to $7.1 million as of March 31, 2008, from $7.5 million as of December 31, 2008 due to the improved collection efforts.
“We expect the acquisition of Shenzhen PengSangPu, which had an effective acquisition date of March 31, 2008, will be a significant growth driver for the balance of this year as contributions begin during the second quarter of 2008. PengSang’s proprietary products, engineering expertise and strong customer base, which includes larger commercial and government buildings, will create a number of synergies while complementing our core product portfolio and extending our footprint into the coveted Southern China market. The acquisition was completed for an estimated aggregate purchase price of $7.0 million in cash and stock and make good provisions were a component.”
“I would like to use this opportunity to welcome Mr. Jacky Yang who recently joined China Solar as the acting CFO. He brings extensive corporate finance experience in several industries and will be asset as we continue to grow our business. Additionally, I want to add that the recent earthquake which hit the Sichuan Province is not anticipated to affect our production or sales during 2008,” Mr. Du concluded.
About China Solar & Clean Energy Solutions, Inc.
China Solar & Clean Energy Solutions, Inc. operates through its wholly owned subsidiaries Bazhou Deli Solar Energy Heating Co. Ltd. ("Deli Solar (Bazhou)"), Beijing Deli Solar Technology Development Co., Ltd. and its 51% ownership in Tianjin Huaneng Group, all located in the PRC. The Company manufactures and distributes hot water and space heating devices to customers in the PRC, in addition to waste heat recovery systems. For more information, please visit http://www.cn-sce.com .
Safe Harbor Statement:
Certain statements in this news release may contain forward-looking information about China Solar & Clean Energy Solutions and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, market and customer acceptance and demand for products, ability to market products, fluctuations in foreign currency markets, the use of estimates in the preparation of financial statements, the impact of competitive products and pricing, the ability to develop and launch new products on a timely basis, the regulatory environment, fluctuations in operating results, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company’s reports filed with the Securities and Exchange Commission. China Solar & Clean Energy Solutions undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
-- FINANCIAL TABLES FOLLOW --
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
As of As of
March 31, December 31,
2008 2007
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 10,733,793 $ 5,466,637
Accounts receivable, net 7,116,825 7,453,009
Inventories 4,065,773 3,875,658
Other receivables and prepayments 4,959,380 1,637,948
Total current assets 26,875,771 18,433,252
Property, plant and equipment, net 9,401,021 8,819,216
Goodwill 1,789,324 1,789,324
Intangible assets, net 1,651,885 1,597,921
TOTAL ASSETS $ 39,718,001 $ 30,639,713
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade $ 1,254,717 $ 2,111,028
Income tax payables 1,411,384 1,108,433
Other payables and accrued liabilities 6,906,468 8,552,452
Total current liabilities 9,572,569 11,771,913
Deferred tax liabilities 259,612 --
Minority interests 1,454,872 935,825
Stockholders’ equity:
Convertible preferred stock 1,609 1,774
Common stock 11,136 6,205
Additional paid-in capital 19,358,497 9,260,607
Accumulated other comprehensive income 1,140,936 1,134,270
Retained earnings 7,918,770 7,529,119
Total stockholders’ equity 28,430,948 17,931,975
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $ 39,718,001 $ 30,639,713
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Currency expressed in United States Dollars (“US$”))
(Unaudited)
For the three months ended
March 31,
2008 2007
Revenue, net $ 8,300,076 $ 2,995,863
Cost of revenue 5,845,016 2,248,915
Gross profit 2,455,060 746,948
Operating expenses:
Depreciation and amortization 149,167 35,336
Selling and distribution 502,563 44,030
General and administrative 601,653 393,957
Total operating expenses 1,253,383 473,323
Income from operations 1,201,677 273,625
Other income (expenses):
Other income 41,090 1,657
Interest expense (33,838) --
Total other income (expenses) 7,252 1,657
Income before income taxes and
minority interest 1,208,929 275,282
Income tax expense 346,263 --
Income before minority interest 862,666 275,282
Minority interests 473,015 --
NET INCOME $ 389,651 $ 275,282
Net income per share - basic $ 0.05 $ 0.04
Net income per share - diluted $ 0.03 $ 0.04
Weighted average shares
outstanding - basic 8,009,713 6,205,290
Weighted average shares
outstanding - diluted 15,284,770 6,957,876
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
For the three months ended
March 31,
2008 2007
Cash flows from operating activities:
Net cash (used in) provided by
operating activities (4,104,526) 909,192
Cash flows from investing activities:
Purchase of property, plant and equipment (730,974) (154,617)
Net cash used in investing activities (730,974) (154,617)
Cash flows from financing activities:
Private placement sale of common stock 9,995,156
Warrant exercise of common stock 107,500 --
Net cash (used in) provided by
financing activities 10,102,656 --
Foreign currency translation adjustment -- 27,551
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,267,156 782,126
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,466,637 3,212,065
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 10,733,793 $ 3,994,191
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ 31,978 $ --
Cash paid for interest expenses $ 33,838 $ --
For more information, please contact:
Yihai Yang
China Solar & Clean Energy Solutions, Inc.
Tel: +86-10-6385-0516
Email: jacky01865@gmail.com
Investor Relations
Matthew Hayden
HC International, Inc.
Tel: +1-858-704-5065
Email: matt@haydenir.com
