- Third Quarter 2009 Revenues Increase 214.6% to $10.8 million, adjusted
net income increased 132.8% to $2.8 million with Adjusted EPS of $0.028
- First Nine Months 2009 Revenues Increase 191.2% to $26.7 million,
adjusted net income increased 149.5% to $6.3 million with Adjusted EPS
of $0.066
- Cash flow from operations was $5.1 million for the first nine months of
2009
- Company Provided 2009 and 2010 Guidance: 2009 Revenues of at least $40
million and Net Income of at least $10 million; 2010 Revenues of at
least $70 million and Net Income of at least $15 million
- Management to Host Earnings Conference Call on Tuesday, November 17,
2009 at 8:30 a.m. ET
BEIJING, Nov. 17 /PRNewswire-Asia-FirstCall/ -- Sino Clean Energy, Inc. (OTC Bulletin Board: SCLX; "Sino Clean Energy," the "Company"), which produces and distributes coal-water mixture in the People’s Republic of China ("PRC"), today announced the Company’s financial results for the third quarter 2009.
SUMMARY FINANCIALS
Third Quarter 2009 Results
Q3 2009* Q3 2008 CHANGE
Sales $10.8 million $3.4 million +214.6 %
Gross Profit $3.9 million $1.1 million +251.4 %
Adjusted Net Income $2.8 million $1.2 million +132.8 %
GAAP Net Income (Loss) ($30.9 million) $1.1 million -2,800.6 %
Adjusted EPS $0.03 $0.01 +200.0 %
GAAP EPS (Diluted) ($0.31) $0.01 -3,200.0 %
*Q3 2009 included a $7.0 million non-cash charge related to the changes in the value of warrants and $24.8 million from the beneficial conversion feature of the notes issued in the July 2009 financing.
Nine Months 2009 Results
2009* 2008 CHANGE
Sales $26.7 million $9.2 million +191.2 %
Gross Profit $9.0 million $2.9 million +206.1 %
Adjusted Net Income $6.3 million $2.5 million +149.5 %
GAAP Net Income (Loss) ($28.8 million) $2.5 million -1,261.5 %
Adjusted EPS $0.07 $0.03 +133.3 %
GAAP EPS (Diluted) ($0.30) $0.03 -1,100.0 %
* The first nine months of 2009 included a $8.2 million non-cash charge related to the changes in the value of warrants and $24.8 million from the beneficial conversion feature of the notes issued in the July 2009 financing.
Third Quarter 2009 Financial Results
Sales -- Sales for the third quarter of 2009 were $10.8 million compared to $3.4 million in the third quarter of 2008, an increase of 214.6%. The increase was mainly due to the expansion of production capacity commencing in early 2009 and growth in the Company’s coal water mixture production compared the same period in 2008. The average selling prices of CWM were higher than the same period of 2008 by approximately 16.9%. Sales volume for CWM production was 94,400 tons, compared to 35,200 tons in the same period in 2008.
Cost of Goods Sold -- Cost of goods sold for the third quarter of 2009 was $6.8 million compared to $2.3 million in 2008, an increase of 196.6%. The increase was due to the rise in production and sales activities. Cost of sales as a percentage of sales was approximately 63.3% for the third quarter of 2009 and 67.2% for same period in 2008. The decrease was due to higher selling prices of CWM, compared to the same period in 2008.
Gross Profit and Gross Margin -- Gross profit was $3.9 million for the third quarter of 2009 compared to $1.1 million for the same period in 2008, an increase of 251.4% and represented gross margins of approximately 36.7% and 32.8%, respectively. The 3.9% variance in gross margins was mainly attributable to higher selling prices of CWM.
Selling, General, and Administrative Expenses -- Selling, general, and administrative expenses for the third quarter of 2009 were approximately $0.9 million compared to $0.2 million for the same period in 2008, an increase of 327%. Total selling, general, and administrative expenses as a percentage of sales for the third quarter of 2009 and 2008 were 8.3% and 6.1%, respectively, with the increase being attributed to transportation costs and financing expenses. Operating income for the third quarter of 2009 and 2008 was $3.1 million and $0.9 million, respectively, representing operating margins of 28.4% for the third quarter of 2009 compared to the third quarter 2008 operating margin of 26.7%.
Net Income (Loss) -- GAAP net loss for the third quarter was $30.9 million, compared to $1.1 million reported in the same period in the prior year. Earnings per diluted share were a negative $0.31 for the third quarter in 2009 compared to $0.01 for the third quarter in 2008, which was based on 100 million shares outstanding. The Company incurred taxes of $0.46 million and $71 in 2009 and 2008, respectively.
Adjusted Net Income -- During the third quarter of 2009 the Company incurred a non-cash charge of $7.0 million for the change in the value of warrants and $24.8 million from the conversion feature of the notes issued in the July 2009 financing. Adjusting for non-cash charges in each respective period, net income for the third quarter of 2009 and 2008 was $2.8 million and $1.2 million, with $0.03 and $0.01 in earnings per diluted share.
"We are pleased with our results for the third quarter which was propelled by a rise in sales of our coal water mixture," stated Baowen Ren, Chairman of Sino Clean Energy. "Our business continues to be driven by a number of factors including the government’s support in the development and utilization of clean energy, as well as government mandate for improved utilization of coal. We are optimistic that demand from existing and new industrial, government and residential users for CWM, coupled with continuing government support, will further drive growth during 2010."
2009 Nine Months Financial Results
For the first nine months of 2009 sales increased 191.2% to $26.7 million from $9.2 million in the same period of the prior year. Cost of sales increased 184.1% to $17.7 million yielding gross profit of $9.0 million, an increase of 206.1% from $2.9 million reported in the year ago period. Gross margins were 33.6% compared to 32.0% during the first nine months of 2009 and 2008, respectively. Selling, general, and administrative expenses increased 213.3% to $1.9 million during the first nine months of 2009 from $0.6 million during the year ago period. Income from operations increased 204.2% to $7.1 million from $2.3 million with operating margins of 26.6% compared to 25.4% in the year ago period. GAAP Net loss for the first nine months of 2009 was $28.8 million for the nine months ended September 30, 2009, a decrease from $2.5 million with corresponding basic earnings per share of negative $0.30 compared to $0.03 based on 96.1 million and 87.2 million shares, respectively. During the first nine months of 2009 the Company incurred a non-cash charge of $8.2 million for the change in the value of warrants and a $24.8 million non-cash charge related to the beneficial conversion feature of notes issued in the July 2009 financing. Adjusting for non-cash charges during each respective period, net income was $6.3 million and $2.5 million, yielding $0.07 and $0.03 in earnings per basic share.
"Based on the recent expansion in total production capacity to 650,000 metric tons and customer orders on hand, we are projecting sales volume of coal water mixture to increase over the next year," continued Baowen Ren. "We recently commenced operations at our new CWM production facility in Shenyang with annual output capacity of 300,000 metric tons which expanded our total annual production capacity to 650,000 metric tons. We currently serve 35 customers under CWM supply agreements totaling approximately 559,000 metric tons per year and we are negotiating with 13 additional customers for supply agreements which could potentially represent up to 333,000 metric tons of CWM. With increased production capacity, an expanding customer base, accelerating demand of clean energy supported by the government’s effort to reduce pollution emission and increase energy yields, we are confident that we are well positioned to capitalize on this growth opportunity in China."
Liquidity and Capital Resources
Cash and cash equivalents were $14.0 million on September 30, 2009, which includes net proceeds of $9.3 million from the July 2009 financing, compared to $3.9 million on December 31, 2008. The Company had working capital of $19.9 million on September 30, 2009 and a current ratio of 12-to-1. Inventories were $0.5 million and the accounts receivable balance was $2.5 million on September 30, 2009, compared to $45 thousand and $0.9 million on December 31, 2008, respectively. The annualized days sales outstanding for the third quarter 2009 were 25 days. Net cash provided by operations was $5.1 million for the first nine months of 2009, compared to $34 thousand used by operations in the same period of 2008. The net cash inflow increased during the first nine months of 2009 was primarily due to a large increase in turnover. The Company had an effective tax rate of 16.76% and 0.98% for the third quarters of 2009 and 2008 respectively, excluding the $8.2 million non-cash charge related to the changes in fair value of warrants and $24.8 million non-cash charge related to the beneficial conversion feature of notes issued in the July 2009 financing.
Financial Outlook for 2009 and 2010
Management provided 2009 guidance and expects to report calendar 2009 sales of at least $40 million and adjusted net income of at least $10 million, representing an increase of 189.9% and 233.3% compared to 2008 sales and net income, respectively. Management provided 2010 guidance and expects to report calendar 2010 sales of at least $70 million and net income of $15 million. Guidance includes the expansion of total production capacity to 900,000 metric tons during 2010.
Government Support in China
China is the world’s largest producer and consumer of coal and is also one of the world’s leading emitters of greenhouse gas (GHG). It is reported that some 70 percent of China’s energy comes from coal, the greatest part of which is burned in outdated power plants that are primary contributors to GHG. To address environmental concerns from the use of coal, the Chinese central government in August 1995 formulated the "9th Five-Year Plan for Clean Coal Technology in China and a Development Program to 2010," which emphasizes the need to strengthen research and development of clean coal technologies and to promote commercialization of proven clean coal technologies including CWM. The China State Environmental Protection Agency (SEPA) states that over $190 billion will be spent by industrial companies for environmental cleanup as part of the 11th Five Year Plan (2006-2010).
About CWM
Coal Water Mixture is a clean coal alternative and is the backbone of Sino Clean Energy’s business. CWM is comprised of approximately 71% coal, 29% water, and less than 1% of chemical catalyst. Compared to coal, on average, CWM increases the burning efficiency, reduces air pollution, reduces coal consumption, and reduces cost in coal material for end users.
About Sino Clean Energy
Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water mixture ("CWM"). Based in Shaanxi Province, Sino Clean Energy is the largest CWM producer in Northwestern China with 650,000 metric tons of total annual capacity. 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 for the change in the fair value of the Company’s warrants under EITF 07-5. 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 the fair value of the Company’s warrants under EITF 07-5 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.
Adjusted Net Income
Three months Nine months
ended ended
Sept. 30, 2009 Sept. 30, 2009
GAAP Net Income $(30,915,068) (28,807,763)
GAAP Basic Earnings Per Share (0.31) (0.30)
Addition (deduction):
Change in fair value of warrants 7,035,248 8,236,238
Cost of private placement 24,794,842 24,794,842
Others 1,851,345 2,072,545
Non GAAP Net Income 2,766,367 6,295,862
Non GAAP Basic Earnings Per Share 0.03 0.07
Shares used in computing net
income per basic share 100,419,101 96,091,295
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, release and sales of new products and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. 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.
For further information please contact:
Company:
Ben Z. Fang
Advisor to the Chairman and CEO
Tel: +1-212-521-3884
Fax: +1-212-521-3888
Email: bfang@axiomcapital.com
Ming Lee
Assistant to the Chairman
Tel: +86-29-8406-7376 (China)
Email: marin_lm@163.com
Investor Relations:
HC International, Inc.
Ted Haberfield, Executive VP
Tel: +1-760-755-2716
Email: thaberfield@hcinternational.net
Web: http://www.hcinternational.net
FINANCIAL TABLES FOLLOW
Sino Clean Energy Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, December 31,
2009 2008
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $13,970,487 $3,914,306
Accounts receivable, net 2,462,248 899,629
Inventories 480,173 45,068
Prepaid inventories 4,164,559 1,996,584
Prepaid expenses 59,767 86,958
Refundable advance -- 731,861
Government grant receivable -- 146,314
Other receivables 24,798 16,986
Loans receivable 543,048 --
Land use right - current portion 38,735 38,703
Total current assets 21,743,815 7,876,409
Property, plant and equipment, net
of accumulated depreciation and
amortization of $1,561,097 and
$491,247, respectively 8,362,457 9,394,416
Land use right - non current portion 1,776,705 1,804,277
Deposits 4,728,203 994,395
Goodwill 762,018 762,018
Deferred debt issuance costs, net
of accumulated amortization of
$114,233 at December 31, 2008 -- 274,278
Total assets $37,373,198 $21,105,793
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities
Convertible notes, current
position, net $-- $383,490
Accounts payable and accrued expenses 945,747 1,004,999
Income and other taxes payable 789,824 305,903
Due to directors 70,229 465,049
Total current liabilities 1,805,800 2,159,441
Convertible notes, less current position,
net (includes $151,233, net amount of
related party convertible notes) 2,921,819 --
Fair value of derivative
liabilities 44,299,127 --
Total liabilities 49,026,746 2,159,441
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,
101,261,786 and 92,181,750 issued
and outstanding as of September 30,
2009 and December 31, 2008
respectively 101,262 92,182
Additional paid-in capital 14,137,202 12,696,549
Retained earnings (accumulated
deficit) (28,375,818) 3,686,087
Statutory reserves 348,309 348,309
Accumulated other comprehensive
income 2,135,497 2,123,225
Total shareholders’ equity
(deficiency) (11,653,548) 18,946,352
Total liabilities and
shareholders’ equity
(deficiency) $37,373,198 $21,105,793
Sino Clean Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other
Comprehensive Income (Loss)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Revenue $10,757,826 $3,419,941 $26,659,312 $9,156,293
Cost of goods
sold (6,812,469) (2,297,227) (17,695,505) (6,227,606)
Gross profit 3,945,357 1,122,714 8,963,807 2,928,687
Selling, general
and admini-
stra tive
expenses 888,249 208,021 1,875,380 598,590
Income from
operations 3,057,108 914,693 7,088,427 2,330,097
Other income
(expense)
Interest expense (3,149,499) -- (4,231,344) --
Expense related
to escrow
shares (1,054,548) -- (1,294,881) --
Commission
income 131,970 80,072 323,261 224,947
Rental income,
net -- 230 79,843
Interest income 11,708 8,026 22,979 19,537
Extinguishment
of derivative
liabilities 2,381,333 -- 3,370,593 --
Change in fair
value of
derivative
liabilities
(7,035,248) -- (8,236,238) --
Cost of private
placement (24,794,842) -- (24,794,842) --
Sundry income -- 78 -- 26,921
Gain on disposal
of property -- 95 -- 33,095
Government grant -- 141,614 -- 141,614
Total other
income (expense) (33,509,126) 230,115 (34,840,472) 525,957
Income (loss)
before income
taxes and non-
controlling
interest (30,452,018) 1,144,808 (27,752,045) 2,856,054
Provision for
income taxes 463,050 71 1,055,718 24,779
Net income
(loss) (30,915,068) 1,144,737 (28,807,763) 2,831,275
Net Income
attributable to
non-controlling
interest -- -- -- (351,149)
Net Income (loss)
attributable to
Sino Clean
Energy, Inc.
(30,915,068) 1,144,737 (28,807,763) 2,480,126
Other
comprehensive
income
Foreign currency
translation
adjustment 3,578 124,319 12,932 934,996
Comprehensive
income
(loss) $(30,911,490) $1,269,056 $(28,794,831) $3,415,122
Weight average
number of
shares
- Basic 100,419,101 92,181,750 96,091,295 87,181,750
- Diluted 100,419,101 92,734,390 96,091,295 87,365,963
(Loss) income
per common share
- Basic $(0.31) $0.01 $(0.30) $0.03
- Diluted $(0.31) $0.01 $(0.30) $0.03
Sino Clean Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
2009 2008
Cash flows from operating activities:
Net income (loss) attributable to Sino
Clean Energy, Inc. $(28,807,763) $2,480,126
Adjustments to reconcile net income to
cash provided by operating activities:
Gain attributable to noncontrolling
interest -- 351,149
Depreciation and amortization 1,069,850 175,399
Amortization of land use right 29,064 28,031
Gain on disposal of property -- (33,095)
Amortization of deferred debt issuance
costs 274,278 8,399
Amortization of discount on
convertible notes 3,873,979 35,127
Expense related to escrow shares 1,294,881 --
Fair value of shares issued for
services 454,935 --
Cost of private placement 24,794,842 --
Change in fair value of derivative
liabilities 8,236,238 --
Extinguishment of derivative liability (3,370,593) --
Change in operating assets and
liabilities
Accounts receivable (1,563,019) (4,923,476)
Inventories (435,105) (240,670)
Prepaid inventories (2,167,975) 1,605,350
Prepaid expenses 27,191 127,689
Refundable advance 731,861 --
Government grant receivable 146,314 411,000
Other receivables (7,812) (14,227)
Accounts payable and accrued expenses 37,982 (196,665)
Income and other taxes payables 483,921 10,143
Assets on discontinued operation
Other receivables -- 141,795
Net cash provided by (used in)
operating activities 5,103,069 (33,925)
Cash flows from investing activities:
Deposits (3,733,408) 188,332
Loans receivable (540,365) --
Purchase of property, plant and
equipment (29,767) (2,747,052)
Proceeds from disposal of property -- 1,025,437
Net cash provided by (used in)
investing activities (4,303,540) (1,533,283)
Cash flows from financing activities:
Repayment of amount due to directors (394,820) (7,427)
Proceeds from issuance of convertible
debentures 11,592,000 1,148,491
Cost of private placement paid in cash (1,543,152) --
Redemption of convertible debenture (400,000) --
Obligations under capital leases -- (27,318)
Net cash provided by financing
activities 9,254,028 1,113,746