omniture

Sino Clean Energy, Inc. Announces Record Second Quarter 2010 Revenue of $24.1 million and Adjusted EPS of $0.32

2010-08-13 07:03 1096
    XI'AN, China, Aug. 13 /PRNewswire-Asia/ -- Sino Clean Energy Inc. (Nasdaq: SCEI) ("Sino Clean Energy," or the "Company"), a leading producer and distributor of coal-water slurry fuel ("CWSF") in the People's Republic of China ("China"), today announced the Company's unaudited financial results for the second quarter of 2010.

    -- Q2 2010 revenues increased 190.4% to $24.1 million; adjusted net income 
       increased 321% to $6.1 million, with adjusted EPS of $0.32
    -- Six months 2010 revenue increased 202.4% to $48.7 million; adjusted net 
       income increased 233% to $11 million, with adjusted EPS of $0.64
    -- Q2 2010 gross margins increased 540 bps year-over-year to 38.8%
    -- Company generated $10.2 million operating cash flow for the first six 
       months of 2010
    -- Management to host Earnings Conference Call on August 13, 2010 at 
       10:00 am ET


    SUMMARY FINANCIALS

    Second Quarter 2010 Results                                          
                             Q2 2010        Q2 2009            CHANGE        
    Sales                 $24.1 million    $8.3 million        + 190.4%
    Gross Profit          $ 9.4 million    $2.8 million        + 237.1%
    Adjusted Net Income   $ 6.1 million(1) $1.45 million(2)    + 321.0%
    GAAP Net Income       $ 8.9 million    $0.5 million        +1550.1%
    Adjusted EPS          $ 0.32           $0.15               + 113.3%
    GAAP EPS (Diluted)    $ 0.47           $0.05               + 840.0%

    (1) Excludes non-cash gain of $2.9 million for the changes in fair value 
        of warrants.
    (2) Excludes non-cash gain of $1.0 million related to extinguishment of 
        derivative liability, non-cash charges of $1.8 million for the changes 
        in fair value of warrants, and $0.1 million related to the shares of 
        common stock placed in escrow in connection with the Company's 
        September 2008 financing.


    Six Months 2010 Results                                              
                              2010             2009            CHANGE    
    Sales                 $48.7 million    $16.1 million       + 202.4%
    Gross Profit          $19.5 million    $ 5.2 million       + 273.9%
    Adjusted Net Income   $11.0 million(1) $ 3.3 million(2)    + 233.3%
    GAAP Net Income       $29.4 million    $ 2.1 million       +1295.2%
    Adjusted EPS          $ 0.64           $ 0.34              +  88.2%
    GAAP EPS (Diluted)    $ 1.71           $ 0.21              + 714.3%

    (1) Excludes non-cash gain of $28.4 million related to extinguishment of 
        derivative liability, non-cash charges of $1.4 million for the changes 
        in fair value of warrants, and $8.6 million for amortization of notes 
        discount.
    (2) Excludes non-cash gain of $1.0 million related to extinguishment of 
        derivative liability, non-cash charges of $1.2 million for the changes 
        in fair value of warrants, $0.75 million for amortization of notes 
        discount, and $0.2 million related to the shares of common stock 
        placed in escrow in connection with the Company's September 2008 
        financing.

    Second Quarter 2010 Financial Results
    Revenue -- Revenue for the second quarter ended June 30, 2010 increased 190.4% to $24.1 million from $8.3 million in the second quarter of 2009, and was driven by increased production capacity from the addition of two new production lines in 2009. The Company's annual production capacity at June 30, 2010 was 850,000 metric tons, reflecting the contribution of the new CWSF production plant in Shengyang with annual output capacity of 300,000 tons, and the 200,000 ton production line added in Tongchuan, Shaanxi province. As of June 30, 2010, Sino Clean Energy had 43 customers under CWSF supply agreements totaling approximately 600,000 metric tons per year, compared to 27 customers totaling approximately 400,000 metric tons of CWSF per year at June 30, 2009.
    "We are pleased with our strong growth and operating results for the second quarter of 2010, and expect robust growth to continue during the balance of 2010 due to our increased production capacity, growing demand for coal water slurry fuel in China, and improved market pricing," stated Baowen Ren, Chairman of Sino Clean Energy. "The CWSF market has continued to expand due to growing customer demand for clean and efficient sources of energy and the government's mandate for reduced emissions through improved utilization of coal. CWSF increases burning efficiency and reduces air pollution, coal consumption and coal material costs for end users while generating attractive gross profit margins for energy producers. As a result, we believe we are well-positioned to further drive incremental revenue and earnings growth and will continue to build upon being a leading producer of CWSF in China."
    Cost of Goods Sold -- Cost of goods sold was $14.8 million for the second quarter of 2010, compared to $5.5 million for the second quarter of 2009, an increase of 167.0%.
    Gross Profit and Gross Profit Margin -- Gross profit increased 237.1% to $9.4 million in the second quarter of 2010, from $2.8 million in the second quarter of 2009, as gross profit margin improved by 540 basis points, driven by better pricing for CWSF in Shenyang. As a result of the new production line added in 2009, depreciation of plant and machinery for the second quarter of 2010 was $0.53 million, as compared to $0.35 million in the second quarter of 2009.
    Operating Expenses -- Operating expenses for the second quarter of 2010 were approximately $1.8 million, up 305.4% from $0.4 million for the second quarter of 2009. Selling expenses totaled $1.1 million for the second quarter of 2010, as compared to $2,261 for the second quarter of 2009. The increase was mainly due to transportation cost, which totaled $1.1 million, due to the growth of the Company's business in 2010. General and administrative expenses totaled $0.6 million for the second quarter of 2010, as compared to $0.4 million for the second quarter of 2009, an increase of 44.8% due primarily to the expansion of the Company's operations and the increased expenses related to being a public company.
    Income from Operations -- Income from operations in the second quarter of 2010 increased 224.5% to $7.6 million, from $2.3 million in the same period in 2009, with operating margins of 31.5% compared to 28.2% in the respective periods.
    Net Income -- For the second quarter of 2010, the Company reported GAAP net income of $8.9 million compared to net income of $0.5 million for the second quarter of 2009, with a corresponding net income per share of $0.47 compared to net income per share of $0.05 based on 19.2 million and 9.9 million diluted shares, respectively. Excluding non-cash items, adjusted net income for the second quarter of 2010 and 2009 was $6.1 million and $1.45 million, respectively, with corresponding adjusted net income per share of $0.32 and $0.15 based on 19.2 million and 9.9 million diluted shares, respectively. (See "Reconciliation of GAAP Net Income to Adjusted Net Income" table below.)

    2010 Six Months Financial Results
    For the first six months of 2010 sales increased 202.4% to $48.7 million from $16.1 million in the same period of the prior year. Cost of sales increased 168.1% to $29.2 million yielding gross profit of $19.5 million, an increase of 274.0% from $5.2 million reported in the prior year period. Gross margins were 40.0% compared to 32.4% during the first six months of 2010 and 2009, respectively. Selling, general, and administrative expenses increased 243.7% to $3.3 million during the first six months of 2010 from $1.0 million during the prior year period. Income from operations increased 281.0% to $16.1 million from $4.2 million with operating margins of 33.1% compared to 26.2% in the prior year period. GAAP net income for the first six months of 2010 was $29.4 million, an increase of 1295.2% from $2.1 million with corresponding diluted earnings per share of $1.71 compared to $0.21 based on 17.2 million and 9.8 million shares, respectively. Adjusting for non-cash charges during each respective period, net income was $11.0 million and $3.3 million, yielding $0.64 and $0.34 in diluted earnings per share.

    Liquidity and Capital Resources
    Cash and cash equivalents were $25.6 million at June 30, 2010 compared to $18.3 million at December 31, 2009. For the first six months of 2010, the Company generated $10.2 million in net cash flow from operations, compared to $5.8 million in the first six months of 2009. The Company had working capital of $16.1 million at June 30, 2010 and a current ratio of 1.6-to-1. Inventories were $0.8 million and the accounts receivable balance was $9.9 million at June 30, 2010, compared to approximately $3.7 million and $0.9 million at December 31, 2009, respectively. The annualized days sales outstanding for the second quarter of 2010 were 37 days.

    Financial Outlook for 2010
    For the year ending December 31, 2010, management reaffirmed guidance and expects revenues of at least $105 million and adjusted net income of at least $25 million, representing an increase of approximately 128.3% and 127.3% compared to 2009 revenues and adjusted net income, respectively. This guidance assumes total sales volume of 850,000 metric tons of CWSF in 2010. The Company expects to end 2010 with 1,150,000 metric tons of total CWSF production capacity.

    Business Outlook for 2010
    Having commenced operations in 2006, Sino Clean Energy has established a first mover advantage as one of the first commercial CWSF producers in China. As of September 30, 2009, Sino Clean Energy is the third largest CWSF producer in China as measured by sales volume with current production capacity of 850,000 metric tons.
    "We plan to increase our CWSF production capacity through the construction of new facilities and the acquisition of existing CWSF production facilities in new geographic regions," stated Baowen Ren, Chairman of Sino Clean Energy. "Our geographic expansion plans will initially focus on Guangdong Province, and Nanning, Guangxi Province. In addition, we plan to expand the production capacity at our current locations in Shenyang, Liaoning Province and Tongchuan, Shaanxi Province and. We expect that such growth initiatives will increase our aggregate annual CWSF production capacity to 1,850,000 metric tons by the first half of 2011, which will drive revenues and earnings growth into the coming year."

    Haizhong Boiler Agreement
    Sino Clean Energy is the exclusive sales agent for Qingdao Haizhong Enterprise Co., Ltd. ("Haizhong Boiler"), which is an unrelated third-party manufacturer of CWSF boilers in China. Haizhong Boiler started producing boilers in 1999, and is one of the largest boiler manufacturers in China, with an estimated 80% market share in the Chinese CWSF boiler market. Following the success of the sales agency agreement in Shaanxi Province the Company entered into a nationwide strategic partnership agreement with Haizhong Boiler in July 2009. Haizhong Boiler focuses on selling CWSF boilers and also operates heat supply plants in select markets, for which Sino Clean Energy is the exclusive supplier of the requisite CWSF. To date, the Company has sold 51 boilers for Haizhong Boiler, all of which were sold to users that ultimately purchased CWSF from Sino Clean Energy.

    Tongchuan Government
    In May 2009, Sino Clean Energy entered into an agreement with Tongchuan City Investment and Development Co., Ltd. ("TCID") to develop and provide CWSF to a new heat supply company for the purpose of providing heating for the new district in Tongchuan. TCID expects that 15 new heat supply plants will need to be built to supply an area of approximately 16.4 million square meters. The first three plants are expected to be built and operational by the end of 2010, with the remaining plants expected to be completed over the following five to seven years. The newly formed heat supply company will require an investment of $12.5 million by TCID, for which it will receive an 85% stake in the new company, and $2.25 million by Suo'ang New Energy, a subsidiary of Sino Clean Energy Inc., for which it will receive a 15% stake in the new company.

    Haizhong Heat Agreement
    In October 2009, Sino Clean Energy entered into an exclusive CWSF supplier agreement with Shenyang Haizhong Heat Resource Co., Ltd. ("Haizhong Heat"), a municipal heat supplier in Shenyang. Haizhong Heat signed an exclusive agreement with the Shenyang municipal government to provide heat to local businesses, residential buildings and hospitals within an area of approximately 12 million square meters. The current area serviced by Haizhong Heat is approximately 4 million square meters, which requires approximately 300,000 metric tons of CWSF on an annual basis. Haizhong Heat has stated its intention that the service area will be increased to 10 million square meters, requiring approximately 850,000 metric tons of CWSF annually by the end of 2012. To date, Sino Clean Energy has sold approximately 164,000 metrics tons of CWSF to Haizhong Heat.

    Nanning Production Facility
    In November 2009, Sino Clean Energy entered into a memorandum of understanding with the local government of Nanning, Guangxi Province, which includes plans to establish a 500,000 metric ton per annum CWSF production facility in the city of Nanning. The Nanning government is aggressively promoting the usage of CWSF as an alternative fuel, and has publicly indicated its intention to establish local CWSF production capacity of 3 million metric tons. Presently, there are only two local CWSF producers in Nanning, each with a capacity of approximately 100,000 metric tons.
    Sino Clean Energy also entered into an agreement with Guangxi New Heat Energy Company ("GNHEC") and is now the exclusive CWSF provider in the Jin Kai Industrial Park of Nanning Economic and Technological Development Area. Sino Clean Energy and GNHEC are in discussions with over 20 potential customers and have already signed letters of intent with eight customers totaling 300,000 metric tons of CWSF demand on an annual basis, and continue negotiations with prospective customers.

    About Sino Clean Energy
    Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water slurry fuel ("CWSF"). With locations in Shaanxi Province and Liaoning Province, Sino Clean Energy is one of the leading CWSF producers in China. For more information about Sino Clean Energy, please visit http://www.sinocei.net/ .

    About Non-GAAP Financial Measures 
    This press release contains non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that our management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of Sino Clean Energy.  Accordingly, management excludes the change in derivative liabilities, gains(losses) on extinguishment of derivative liabilities, expenses related to escrow shares and amortization of note discount when making operational decisions. The Company believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.
    The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.

    Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Unaudited)

                                  Three Months ended      Six Months ended
                                        June 30              June 30
                                      2010       2009         2010      2009
    Adjusted Net Income                                                  
    Net income                  $ 8,940,759    541,829   29,401,380  2,107,305
    Expense related to escrow                                            
     shares                              --    120,166           --    240,333
    Gain on extinguishment of
     derivative liability                --   (989,260) (28,404,181)  (989,260)
    Change in fair value of       
     derivative liabilities      (2,862,263) 1,779,968    1,377,666  1,200,990
    Amortization of CD discount                           8,601,975    753,025
                                  6,078,496  1,452,703   10,976,840  3,312,393

    Weight average number of                                             
     shares                                                              
     -Basic                      16,557,000  9,532,061   14,714,742  9,376,630
     -Diluted                    19,216,041  9,910,926   17,161,540  9,806,755
                                                                         
    Adjusted earnings per
     common share
     -Basic                     $      0.37       0.15        0.75        0.35
     -Diluted                   $      0.32       0.15        0.64        0.34


    Safe Harbor Statement
    This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to uncertainties in product demand, the impact of competitive products and pricing, our ability to obtain regulatory approvals, changing economic conditions around the world and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



                     Sino Clean Energy Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                       (Amounts expressed in U.S. Dollars)

                                                 June 30,        December 31,
               ASSETS                              2010             2009
    Current assets                             (Unaudited)
    Cash and cash equivalent                   $25,575,339       $18,302,558
    Accounts receivable, net                     9,870,866         3,655,473
    Inventories                                    744,717           892,609
    Prepaid inventories                          4,780,173         5,453,095
    Prepaid expenses                                 8,716           259,627
    Other receivables                               29,389            65,584
    Tax recoverable                                     --           138,495
    Due to formerly related co., -
     Hangson                                            --                --
    Prepaid land use right - current
     portion                                        38,952            38,739

    Total current assets                        41,048,152        28,806,180

    Property, plant and equipment, net          15,416,876        12,557,691
    Land use right - non current portion         1,768,811         1,778,562
    Goodwill                                       762,018           762,018
    Intercompany accounts                               --                --
    Prepayments and deposits                     1,478,701           729,328

    Total assets                               $60,474,558       $44,633,779

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
    Accounts payable and accrued expenses        2,267,772         2,672,211
    Taxes payable                                2,688,277         1,577,249
    Amount due to directors                         73,466            73,466
    Other payables                               1,814,045                --
    Temporary payables                               5,000
    Due to formerly related co.,  -
     Suo'ang BST                                        --                --
    Derivative liabilities                      18,130,524        16,752,858

    Total current liabilities                   24,979,084        21,075,784

    Convertible notes, net of discount                $ --        $1,615,025
    Derivative liabilities                              --        28,404,181

    Total liabilities                           24,979,084        51,094,990

    Commitments and Contingencies

    Shareholders' Equity (Deficiency)
    Preferred stock, $0.001 par value,
     50,000,000 shares authorized,
     none issued and outstanding
    Common stock, $0.001 par value,
     300,000,000 shares authorized,
     16,557,000 and 10,849,863 issued and
     outstanding as of June 30, 2010
     and December 31, 2009 respectively             16,557            10,850
    Additional paid-in capital                  37,700,930        25,432,804
    Accumulated deficit                         (6,401,607)      (35,802,987)
    Statutory reserves                           1,758,553         1,758,553
    Accumulated other comprehensive
     income                                      2,421,041         2,139,569

    Total Shareholders' equity
     (deficiency)                               35,495,474        (6,461,211)

    Total liabilities and shareholders'
     equity                                    $60,474,558       $44,633,779



                 Sino Clean Energy Inc. and Subsidiaries
        Consolidated Statements of Income and Other Comprehensive Income
                   (Amounts expressed in U.S. Dollars)
                                (Unaudited)

                              Three Months ended        Six Months ended 
                                    June 30,                 June 30,
                               2010         2009        2010         2009

    Revenue                 $24,149,761  $8,314,500  $48,658,765  $16,092,777

    Cost of goods sold      (14,779,016) (5,534,929) (29,179,193) (10,883,036)

    Gross profit              9,370,745   2,779,571   19,479,572    5,209,741

    Selling expenses          1,136,019       2,261    2,047,098        5,820
    General and
     administrative
     expenses                   626,053     432,412    1,345,235      981,311

    Income from operations    7,608,673   2,344,898   16,087,239    4,222,610

    Other income (expenses)
      Interest expense and
       finance costs            (13,591)   (596,098) (10,458,154)  (1,081,845)
      Expense related to
       escrow shares                 --    (120,166)          --     (240,333)
       Exchange gain               (775)         --         (775)          --
      Commission income              --          --           --           --
      Rental income, net             --          --           --           --
      Interest income            19,353       7,285       32,224       11,271
      Stock-based
       compensation                  --          --           --           --
      Gain on
       extinguishment of
       derivative liability          --     989,260   28,404,181      989,260
    Change in fair value of
     derivative liabilities   2,862,263  (1,779,968)  (1,377,666)  (1,200,990)
      Cost of private
       placement                     --          --           --           --
      Sundry income
       (expenses)                 5,463          --        5,463           --
      Loss on disposal of
       subsidiaries                  --          --           --           --
      Government grant               --          --           --           --
    Total other income
     (expenses)               2,872,713  (1,499,687)  16,605,273   (1,522,637)

    Income before provision
     for income taxes        10,481,386     845,211   32,692,512    2,699,973

    Provision for income
     taxes                    1,540,627     303,382    3,291,132      592,668

    Net income before non-
     controlling interest     8,940,759     541,829   29,401,380    2,107,305

    Less: Non-controlling
     interest                        --          --           --           --

    Net income                8,940,759     541,829   29,401,380    2,107,305

    Other comprehensive
     (loss) income
      Foreign currency
       translation
       adjustment               269,266      12,010      281,472        8,694

    Comprehensive (loss)
     income                  $9,210,025    $553,839  $29,682,852   $2,115,999

    Weight average number
     of shares
     -Basic                  16,557,000   9,532,061   14,714,742    9,376,630
     -Diluted                19,216,041   9,910,926   17,161,540    9,806,755

    (Loss) Income per
     common share

     -Basic                       $0.54       $0.06        $2.00        $0.22
     -Diluted                     $0.47       $0.05        $1.71        $0.21




                        Sino Clean Energy Inc. and Subsidiaries
                   Condensed Consolidated Statements of Cash Flows
                                     (Unaudited)
                                                  Six Months Ended June 30,
                                                    2010               2009
      Cash flow from operating activities:
        Net income                              $29,401,380        $2,107,305
        Adjustments to reconcile net
         income to cash provided by
         operating activities:
          Depreciation and amortization           1,008,832           713,062
          Amortization of deferred debt
           issuance costs                                --           217,102
          Amortization of discount on
           convertible notes                      8,601,975           753,025
          Interest expenses                       1,864,701                --
          Expense related to escrow
           shares                                        --           240,333
          Fair value of common stock
           issued for services                           --           454,935
          Gain on extinguishment of
           derivative liability                 (28,404,181)         (989,260)
          Change in fair value of
           derivative liabilities                 1,377,666         1,200,990
          Inter-co current account                       --                --
          Change in operating assets and
           liabilities :                                 --                --
              Accounts receivable                (6,215,393)       (1,213,446)
              Deferred expenses                          --                --
              Other receivables                      36,195            (6,444)
              Prepaid expenses                      250,911            60,994
              Refundable advance                         --           731,861
              Fair value of vested
               options                               18,152                --
              Inventories                           147,892          (167,440)
              Prepaid inventories                   672,922           819,974
              Tax recoverables                      138,495                --
              Accounts payable and
               accrued expenses                     236,559           429,654
              Government grant receivable                --           146,314
              Other payable                              --                --
              Taxes payables                      1,111,028           255,041

        Net cash provided from operating
         activities                              10,247,134         5,754,000

      Cash flows from investing
       activities :
        Deposits and prepayment                     (97,320)           47,880
        Purchase of property, plant and
         equipment                               (2,606,556)               --
        Net cash used in investing
         activities                              (2,703,876)           47,880

      Cash flows from financing
       activities :
        Deposits and prepayment                    (652,053)               --
        Payment of advances from director                --          (395,066)
        Cash received from exercise of
         warrants and options                       173,980                --
        Net cash provided from (used in)
         financing activities                      (478,073)         (395,066)

      Effect of foreign currency
       translation                                  207,596            29,997

      Net increase in cash and cash
       equivalents                                7,272,781         5,436,811

      Cash and cash equivalents,
       beginning of period                       18,302,558         3,914,306

      Cash and cash equivalents, end of
       period                                   $25,575,339        $9,351,117
Source: Sino Clean Energy Inc.
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