- FY08 Revenue Increases 44.8% to $53.7 Million -
- Mr. Edward Chan Named Chief Operating Officer -
- Dr. Weizhong Xiang Named Chief Technology Officer -
BEIJING, April 16 /PRNewswire-Asia/ -- China Solar & Clean Energy Solutions, Inc. ("CSOL" or "China Solar" or the "Company")
(OTC Bulletin Board: CSOL), a premier manufacturer and distributor of solar water heaters, renewable energy solutions, and space heating devices in the People's Republic of China, today reported its financial results for the year ended December 31, 2008 and announced two new additions to its senior management team -- Mr. Edward Chan and Dr. Weizhong Xiang as Chief Operating Officer and Chief Technology Officer, respectively.
Full Year 2008 Results
Revenues for 2008 increased 44.8% to $53.7 million, compared to $37.1 million for 2007, driven by higher revenues from the Heat Pipe and
Energy-saving segments. Heat Pipe revenues increased 136% to $16.6 million from $7.0 million in 2007, as CSOL did not begin to sell Heat Pipe related products until its acquisition of Tianjin Huaneng on July 1, 2007, and therefore, Heat Pipe revenue in 2007 only reflected 2H07 total sales.
Energy-saving revenues increased 169% to $9.1 million, versus $3.4 million in 2007, as the Company completed its acquisition of Shenzhen PengSangPu ("SZPSP") in March 2008. During the year, revenues for the Solar Heater/Biomass Stove/Boiler ("Solar-Biomass-Boiler") segment decreased by $1.6 million to $25.1 million in 2008, as the Company accounted for the sales of certain products of this segment under a new fourth segment and, to a lesser extent, due a decrease in the selling prices as a result of increased competition. In 2008, the Company added a new revenue segment named Solar Heat Collector and Others and recorded $3.0 million of revenues in this segment, as compared to zero in 2007.
Gross margin for 2008 was 17.4%, compared to 22.4% in 2007, primarily due to a decrease in the selling prices as a result of increased competition in the industry. Operating expenses increased to $9.1 million for 2008 as compared to $5.1 million for 2007, primarily due to higher marketing and promotional expenses and higher salary and benefits associated with the expansion of the sales force. While recurring administrative expenses improved in 2008, the Company incurred one-time liquidated expenses of approximately $0.5 million paid to certain investors due a delay in effecting a registration pursuant to its agreement with such investors in its February 2008 private placement. The Company also recognized higher administrative expenses attributable to the consolidation of SZPSP and professional fees associated with the private placement.
Operating income was $0.2 million for 2008, as compared to $3.2 million for 2007, and operating margin was 0.5% in 2008, as compared to 8.6% in 2007. In 2008, the Company recognized non-recurring expenses of approximately $3.0 million, including goodwill impairment of $2.3 million related to its acquisition of SZPSP and inventory write-downs of approximately $0.2 million. Consequently, the Company reported a net loss of $4.2 million in 2008, compared with a net income of $2.5 million in 2007. Net loss per share was $0.34 in 2008 versus diluted net income per share of $0.22 in 2007.
Cash and cash equivalents decreased to $2.4 million on December 31, 2008, compared to $5.5 million on December 31, 2007. This decrease was due to increased spending on working capital and capital expenditures and to two loans totaling $3.4 million made to Shenzhen Fuwaysun Technology Co., Ltd. ("Fuwaysun"), as part of a pending acquisition agreement between China Solar and Fuwaysun. Net cash used in operating activities was $4.6 million for 2008, as compared to net cash provided for operations of $4.7 million for 2007, mainly due to an increase in inventories, advancements to suppliers, and production costs for energy saving projects. As of December 31, 2008, the Company had net working capital of $8.7 million and zero debt.
Mr. Deli Du, Chief Executive Officer and President of CSOL, commented, "While I'm pleased that our total revenue increased 45% in 2008, in retrospect, fiscal year 2008 was a transition year for CSOL. Although we have successfully integrated our acquisitions of Tianjin Huaneng and SZPSP and witnessed higher revenues in their respective segments, we experienced lower selling prices and gross margins in our Solar Heater segment. As we continued to invest into our sales organization and manufacturing infrastructure, we have yet to realize the full benefits from these investments and therefore incurred net losses for the full fiscal year. I am, however, excited about the significant expansion of our senior management team. In March, we announced the appointment of Ms. Veronica Jing Chen, a seasoned executive with broad experience and proven leadership, as our new Chief Financial Officer. Today, I am delighted to announce the creation of two new senior positions of Chief Operating Officer and Chief Technology Officer and the addition of two excellent members to our growing senior management team, as we demonstrate our commitment to continue building a strong, diverse and capable management team."
Expanded Management Team
CSOL has appointed Mr. Edward Chan and Dr. Weizhong Xiang to two newly created positions of Chief Operating Officer and Chief Technology Officer, respectively.
Mr. Chan, COO, has rich operations knowledge and a strong management track record gained from more than 20 years of experience in sales, marketing and general management with various companies throughout China. Prior to joining CSOL, he was the Associate Managing Director of Shenzhen Coolead Industry Co. Ltd., a company specialized in constructing energy efficient buildings in China. Before that, Mr. Chan served as marketing director of Hitachi China, Strategy General Manager of Broad Air Conditioning, Business Consultant of Philips (China) and Sales manager of Aluminum Corporation of China. Mr. Chan holds an MBA from Royal Roads University and a Bachelor's degree from the Hong Kong Polytechnic University.
Dr. Xiang, CTO, possesses deep technical expertise in large-scale clean tech and energy-saving projects as well as broad engineering experience in the United Kingdom and China. Prior to joining CSOL, he served as Vice Director of the Hoare Lea Consulting Engineers, a firm of consulting engineers specializing in mechanical, electrical and environmental engineering. Dr. Xiang has consulted and advised on more than 50 large-scale construction projects, primarily consisting of clean tech and energy-saving building projects, such as London 2012 Olympic projects, Heathrow Airport and the University of Oxford Science Park. Before that, he was Senior Analyst in charge of thermal products analysis at GE (UK) Fluid and Heat Division, where he successfully led the development of several major products and optimized product designs in various others. A registered engineer in the United Kingdom, Dr. Xiang holds a Ph.D from Brunel University and a Master's Degree from the Harbin Institute of Technology.
Mr. Du continued, "I am elated in welcoming Messrs. Chan and Xiang to our senior management team. As COO, Mr. Chan will lead our continued efforts in streamlining our operations while helping me to coordinate our launch of new products and expansions into new markets. As CTO, Dr. Xiang will draw on his deep expertise to lead our technology teams in the development and adoption of new products and technologies. We plan to leverage Dr. Xiang's rich experience and strong technical skills, both in China and the UK, to integrate our various technologies and products and to innovate new clean energy solutions as we aim capture a growing share of China's large clean energy market opportunities."
Growth Strategy
Mr. Du concluded, "With our strong, expanded management team in place, our solid portfolio of technologies and products in development, our nationwide distribution and sales force strengthened, CSOL is well positioned to capture the many attractive opportunities in our immediate industry, as well as complementary markets in China and abroad. I am encouraged by the government's initiatives to expand the availability of and access to electricity in China's immense rural areas, which will create substantially higher demand for our products and solutions. I am energized by our gainful technical and marketing abilities to win additional market share in the energy-saving segment, as our customers continue to recognize the economic and social benefits of recycling. I am excited by our unique business model and pioneering solutions for solar projects in hot water systems throughout China's numerous Universities. This business model, though requiring initial capital investments, can deliver reliable profits and cash flows for many years to come. We continue to explore government-supported financing facilities and subsidies that can further accelerate the ROIs of our unique solutions.
"Moreover, we continue to pursue additional strategic opportunities to further augment our existing business. On April 9, 2009, our Board approved an amendment to extend the consummation of our acquisition of Fuwaysun until June 30, 2009. We believe that Fuwaysun's market leadership in portable solar applications for rural settings, combined with our nationwide distribution and marketing resources, will deliver immediate accretion to our revenue, margins, and overall profits upon completion of the acquisition. We have identified many applications both in China and abroad for Fuwaysun's core technologies, and we are very excited by the responses from Fuwaysun's existing and potential customers. We remain confident that we will complete Fuwaysun's acquisition by the end of June 2009.
"Thus, as we near the completion our business transition and the completion of our Fuwaysun acquisition, I believe that CSOL will achieve strong revenue growth, margin expansions, and solid profits and cash flows in the near future. Our new management team is dedicated to growing a strong, profitable and responsive enterprise at China Solar, and importantly, to serving the best interests of our supportive shareholders and maximizing our shareholders' value."
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., Shenzhen PengSangPu Solar Industrial Products Corporation 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.delisolar.com .
Cautionary Statement Regarding Forward Looking Information
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.
For more information, please contact:
Veronica Chen
China Solar & Clean Energy Solutions, Inc.
Tel: +86-10-6386-8188
Email: vjchen36@hotmail.com
Michael Tieu
ICR
Tel: +86-10-6599-7960
Email: Michael.tieu@icrinc.com
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Currency expressed in United States Dollars ("US$"))
Year Ended December 31,
2008 2007 2006
As adjusted and
Restated*
Revenue, net $53,683,651 $37,072,346 $21,468,313
Cost of revenue 28,772,078 16,842,994
44,363,787
Gross profit 9,319,863 8,300,268 4,625,319
Operating expenses:
Depreciation and
amortization 955,443 282,822 154,946
Selling and distribution 3,995,401 827,839 459,746
General and administrative 4,127,069 4,003,973 2,800,015
Total operating expenses 9,077,912 5,114,634 3,414,707
Income from operations 241,951 3,185,634 1,210,612
Other income (expenses):
Other income 197,154 220,057 45,606
Interest income 262,233 -- --
Other expense (547,705) -- --
Interest expense (292,167) (65,481) (16,717)
Loss on nonrecurring items (3,012,488) -- --
Total other income (expenses) (3,392,973) 154,576 28,889
Income before income taxes (3,151,022) 3,340,210 1,239,501
Income tax expense (193,418) (615,325) --
Minority interests (818,893) (199,744) --
NET INCOME $(4,163,332) $2,525,141 $1,239,501
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS (4,163,332) $1,549,334 1,239,501
Net income per share - basic (0.34) $0.25 0.20
Net income per share - diluted (0.34) $0.24 0.18
Weighted average shares
outstanding - basic 12,158,482 6,205,290 6,205,290
Weighted average shares
outstanding - diluted 12,158,482 6,396,697 6,957,876
* RESTATEMENT ON CONSOLIDATED FINANCIAL STATEMENTS
In April 2008, we filed a registration statement on Form S-1 with the Securities and Exchange Commission relating to the sale by certain selling stockholders identified in the related prospectus of up to 5,160,649 shares of our common stock including 469,150 shares they may acquire on exercise of warrants. When reviewing our financial statements for inclusion in the prospectus, we became aware of an error in the calculation of diluted net income per share for the year ended December 31, 2007. We misapplied the treasury stock and the "if converted" methods under SFAS No. 128 and because of the error we identified, we have restated our historical financial statements for 2007 to record an increase of 10 cents in diluted net income per share.
This 10 cents per share adjustment was non-cash. The error had no impact on our reported assets, liabilities, equity, revenue, expenses or earnings. There was no cumulative effect on retained earnings or other components of equity in the balance sheet at December 31, 2007. It had no impact on basic earnings per share. Nor did it have any impact on cash or cash equivalents. It had no impact on prior year financial statements and, likewise, will have no impact on future financial statements.
The following table sets forth the income statement impact of the
restatement:
December 31, 2007
As reported Adjustment As Restated
Diluted - Total
weighted average
shares outstanding 11,233,026 (4,836,329) 6,396,697
Diluted net income
per share $0.14 0.10 0.24
The impact of the restatement on the disclosures of earnings per share
data is set forth in the table below:
December 31, 2007
As reported Adjustment As Adjusted
Denominator:
- Weighted average
preferred stock
outstanding 1,337,097 (1,337,097) --
- Weighted average
warrant shares
outstanding 3,690,639 (3,499,232) 191,407
Diluted - Total
weighted average
shares outstanding 11,233,026 4,836,329 6,396,697
Diluted net income
per share $0.14 0.10 0.24
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars ("US$"),
except for number of shares)
As of December 31,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $2,404,996 $5,466,637
Accounts receivable, net 7,284,255 7,453,009
Inventories 6,950,844 3,875,658
Other receivables and prepayments 7,870,575 1,637,948
Lease receivables, current 156,579 --
Total current assets 24,667,249 18,433,252
Property, plant and equipment, net 15,366,009 8,819,216
Goodwill 2,284,903 1,789,324
Intangible assets, net 1,709,184 1,597,921
Customer relationships, net 1,017,500 --
Intellectual property - unpatented
technology, net 869,500 --
Lease receivables, non-current 654,578 --
TOTAL ASSETS $46,568,923 $30,639,713
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $5,301,349 $2,111,028
Income tax payables 2,236,298 1,108,433
Other payables and accrued liabilities 8,386,698 8,552,452
Total current liabilities 15,924,345 11,771,913
Deferred tax liability 15,779 --
Minority interests 1,704,248 935,825
Stockholders' equity:
Convertible preferred stock: par value
$0.001; 25,000,000 shares authorized,
373,000 and 1,774,194 shares issued and
outstanding, respectively 373 1,774
Common stock, $0.001 par value; 66,666,667
shares authorized; 13,799,450 and
6,205,690 shares issued and
outstanding, respectively 13,799 6,205
Additional paid-in capital 22,966,404 9,260,607
Accumulated other comprehensive income 1,615,082 1,134,270
Retained earnings 3,365,788 7,529,119
Profit earning reserves 963,106 --
28,924,551 17,931,975
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $46,568,923 $30,639,713
CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars)
Years ended December 31,
2008 2007 2006
Cash flows from operating activities:
Net income (4,163,332) $2,525,141 $1,239,501
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 1,280,429 324,157 178,437
Impairment for goodwill,
inventory 2,702,488 -- --
Provision for allowance on
accounts receivable 978,006 650,432 (77,267)
Changes in operating assets and
liabilities:
Accounts receivable, trade (965,831) (7,232,995) (238,334)
Inventories (3,313,403) (3,559,893) 67,418
Other receivables and prepayments (6,232,627) (250,037) (238,268)
Accounts payable, trade 3,190,321 1,963,127 58,526
Income tax payable 1,127,865 1,108,433 --
Other payables and accrued
liabilities (59,921) 8,209,641 262,885
Minority interest 818,893 935,825 --
Net cash provided by operating
activities (4,637,112) 4,673,831 1,252,898
Cash flows from investing activities:
Acquisition of a subsidiary (662,491) (489,459) --
Deposits made to acquire subsidiary -- -- (256,278)
Purchase of intangible assets (981,283) (635,726) (932,732)
Purchase of property, plant and
equipment (7,364,222) (4,294,741) (2,815,398)
Net cash used in investing
activities (9,007,996) (5,419,926) (4,004,408)
Cash flows from financing activities:
proceeds from warrants exercised 107,500 (180,694) (130,112)
Capital contribution received from
shareholders 9,995,156 -- --
Proceeds from issuance of
preferred stock (net of offering
costs of $169,000 paid in cash) -- 2,581,000 --
Related receivable -- -- 82,639
Related payables -- -- 22,528
Net cash (used in) provided by
financing activities 10,102,656 2,400,306 (24,945)
Foreign currency translation
adjustment 480,812 600,361 359,352
NET CHANGE IN CASH AND CASH
EQUIVALENTS (3,061,640) 2,254,572 (2,417,103)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 5,466,637 3,212,065 5,629,168
CASH AND CASH EQUIVALENTS,
END OF YEAR 2,404,996 $5,466,637 $3,212,065
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes 538,332 $939,798 $--
Cash paid for interest expenses 302,961 $95,446 $16,717
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING TRANSACTIONS
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING TRANSACTIONS
Warrant shares granted for offering
costs $541,695 $138,338 $--
Issuance of common stock for
acquisitions of SZPSP $2,839,458 $-- $--
Issuance of warrants for the $92,193
acquisitions of SZPSP $-- $--
Preferred share converted $1,401 $-- $--
