Revenues increase 130% to $44.2 million in 2009, up from $19.2 Million in 2008
Net Income increased by approximately $11.9 million from 2008
2010 Guidance: Revenue in the range of $68-72 million, with $18-20 million net income, exclusive of non-cash expenses
XI'AN, China, March 18 /PRNewswire-Asia/ -- China Recycling Energy Corp. (OTC Bulletin Board: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, on March 16, 2010 announced its full year 2009 financial results and its fiscal year 2010 business guidance.
09 Results Highlight:
-- Revenues grew by 130% to $44.2 million for the year ended December 31,
2009 from $19.2 million for the year ended December 31, 2008.
-- Income from operations grew by 229% to $13.5 million for the year ended
December 31, 2009 from $4.1 million for the year ended December 31,
2008.
-- Net income grew to $9.7 million for the year ended December 31, 2009
from approximately a net loss of $2.2 million for the year ended
December 31, 2008.
-- Fully diluted EPS of $0.21 for the year ended December 31, 2009 versus
a loss of $(0.07) for the year ended December 31, 2008.
-- Non-GAAP net income grew by 348.5% to $ 13.59 million from the year
ended December 2009 from $3.9 million for year ended December 2008.
Non-GAAP EPS was $ 0.29 for the year ended December 2009, compared to
$0.08 for the year ended December 31 2008
Summary of Financial Results
(In '000s of U.S. Dollars, FOR THE FOR THE
except per share data) YEAR ENDED YEAR ENDED
2009 2008
Revenue $44,235 $19,218
Gross Profit 10,634 5,216
Income before Tax
(IBT) 13,008 (587)
Net income 9,709 (2,220)
Non-GAAP net income (1) 13,588 3,902
Diluted EPS 0.21 (0.07)
Non-GAAP diluted EPS (1) (2) 0.29 0.8
(1) CREG provides income before tax, 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 pleased to see that 2009 marked a significant year in the execution of our growth plan. We have been successfully continuing developing our Build-Operate-Transfer ("BOT") business model, delivering more comprehensive energy recycling solutions, and growing our recurring revenue bases while diversifying the mix of our customers," Mr. Guohua Ku, Chairman and CEO of CREG, said. "Looking ahead, we are more confident in our continued growth in 2010 and beyond, since we are in full swing rolling out our efforts to fulfill the engagement in various phases for all our projects with all partners, including Erdos Metallurgy and Sino Steel Group."
Financial Results for the Year Ended December 31, 2009
Net sales for the year ended December 31, 2009 were $44.24 million while net sales for the year ended December 31, 2008 were $19.22 million, an increase in revenues of $25.02 million or 131.1%. Product sales contributed 38.3 million, or 86.6% of the total revenue in 2009, compared with $8 million, or 41.9% of the total revenue in 2008. Rental incomes contributed 5.9 million, or 13.4% of total revenue, compared with $11.2 million, or 58.1% of the total revenue in 2008. The net sales increase was primarily due to selling three energy recovery systems through sales-type leases during the year ended December 31, 2009, compared with one energy recovery system sold during 2008. The decrease of rental incomes was due to the discontinuing of the operational leases during April 2009.
Gross profit was $10.63 million for the year ended December 31, 2009 as compared to $5.22 million for the same period in 2008, representing a gross margin of approximately 24% and 27% for the year ended December 31, 2009 and 2008, respectively. The increase in gross profit was mainly from more product sales during 2009.
Operating income was $17.69 million for the year ended December 31, 2009 while operating income for the same period in 2008 was $7.50 million, an increase of $10.19 million. The growth in operating income was mainly due to the substantial increase in product sales and interest income from sale-type leasing during 2009. Interest income on sales-type leases for the year ended December 31, 2009 was $7.05 million, a $4.76 million increase from $2.29 million for the same period in 2008.
Operating expenses consisted of selling, general and administrative expenses totaling $4.19 million for the year ended December 31, 2009 as compared to $3.35 million for the same period in 2008, an increase of $840,604 or 25%. This increase was mainly due to increased expenses in connection with the Company's sales of three energy recovery systems through sales-type leases in 2009.
For the year ended December 31, 2009, income from operations was $13.5 million compared with $4.1 million in the same period of 2008, resulting in a 229% increase year-over-year.
Income before tax was 13.0 million, compared with a net loss of 586,827 in 2008. Non-GAAP income before tax, as defined above, was $14.8 million, compared with 5.5 million in 2008.
The income tax expense was $2.9 million with the effective tax rate of 22.7%, consisted of the current income tax expense of $0.86 million and the deferred income tax expenses of $2.09 million for the year ended December 31, 2009. The 70% portion of the income taxes expense was non-cash deferred expense corresponding with deferred income tax liability. The reason for having higher deferred income tax liabilities is primarily because of higher tax rates applied to the Company's main operating subsidiary in Xi'an over the lease term years after three-year of preferential tax status for high-tech enterprises.
For the year ended December 31, 2009, net income was $9.7 million compared with a net loss of $2.2 million in the same period of 2008. For the year ended December 31, 2009, GAAP diluted EPS was $0.21, compared with a diluted loss per share of $0.07 in the same period of 2008.
As of December 31, 2009, cash and cash equivalents were $1.1 million, compared with $7.3 million at year-end 2008, a decrease of $6.2 million. Total investments in sales-type leases were $52.5 million, compared with $16.8 million as of the end of 2008. Net cash provided by operating activities was $15.9 million in the year ended December 31, 2009, compared with net cash from operations of $2.0 million in the same period of 2008. The Company believes that the operating activities will create a steady recurring cash inflow streams from the operating projects in the 2010. In the meantime, the company has certain revolving lines of credit with banks, which are either zero balance or unused, but may serve for instant working capital purpose if needed, and is committed with a financial institute for loan capital funding. The company believes that its cash resources are continuing to grow during 2010.
As of December 31, 2009, the Company has total shares outstanding of 38,778,035.
Non GAAP Financial Measurement
The Company believes 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 Earnings
Per Share For the Year Ended December 31,
2009 2008
Net Income attributed to CREG $9,709,276 $(2,219,581)
Adjustments -- --
Deferred taxes 2,085,444 --
Interest and financing costs
related to conversion of
convertible debentures -- 4,684,932
Stock based compensation 1,793,228 1,436,533
Adjusted Net Income 13,587,948 3,901,904
Diluted Weighted Average Shares
Outstanding 46,261,985 49,702,199
Adjusted Earnings per Share $0.29 $0.08
Non-GAAP net income, as defined above, was $13.58 million, or non-GAAP diluted EPS $0.29, compared with 3.9 million Non-GAAP net income, or $0.08 Non-GAAP diluted EPS in 2008. GAAP net income was $9.7 million, or GAAP diluted EPS of $0.21, compared with GAAP net loss of $2.2 million, or GAAP diluted loss per share of $0.07 in 2008. The lower GAAP net income reflected higher non-cash charges related to convertible notes and stock-based employee compensation, as well as higher deferred income tax rate levied.
Year 2010 Guidance
The Company expects revenues for 2010 to be in the range of $68 million to $72 million, with net income, excluding non-cash charges, $18 million to 20 million. These targets are based on the Company's current views on the 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. (OTCBB: 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: +86-29-8765-1097
Email: tch@creg-cn.com
In USA:
Mr. Howard Gostfrand
American Capital Ventures, Inc.
Tel: +1-305-918-7000
Email: hg@amcapventures.com
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash & cash equivalents $1,111,943 $7,267,344
Restricted cash 1,461,659 --
Investment in sales type leases, net 4,396,395 1,970,591
Interest receivable on sales type
leases 437,626 82,406
Prepaid expenses 445,458 3,849,087
Other receivables 1,524,949 102,850
Inventory -- 10,534,633
Total current assets 9,378,030 23,806,911
NON-CURRENT ASSETS
Investment in sales type leases, net 48,147,738 14,837,879
Advance for equipment -- 2,642,889
Property and equipment, net 97,311 95,359
Construction in progress 34,858,845 3,731,016
Intangible assets, net -- 3,482
Total non-current assets 83,103,894 21,310,625
TOTAL ASSETS $92,481,924 $45,117,536
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $3,583,219 $1,186,902
Notes payable - bank acceptances 1,461,659 --
Unearned revenue -- 658,415
Taxes payable 681,707 1,313,949
Accrued liabilities and other payables 2,785,796 3,528,527
Advance from related parties, net 468,475 --
Deferred tax liability 148,193 --
Convertible notes 8,000,000 5,000,000
Total current liabilities 17,129,049 11,687,793
DEFERRED TAX LIABILITY, NET 2,762,115 823,407
ACCRUED INTEREST ON CONVERTIBLE NOTES 353,024 168,494
LOAN PAYABLE 25,570,429 --
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
100,000,000 shares authorized,
38,778,035 and 36,425,094
shares issued and outstanding
as of December 31, 2009 and
2008, respectively 38,779 36,425
Additional paid in capital 38,319,163 34,528,289
Statutory reserve 2,497,724 1,319,286
Accumulated other comprehensive income 3,709,490 3,582,587
Retained earnings (deficit) 1,485,914 (7,044,924)
Total Company stockholders' equity 46,051,070 32,421,663
Noncontrolling interest 616,237 16,179
Total equity 46,667,307 32,437,842
TOTAL LIABILITIES AND EQUITY $92,481,924 $45,117,536
The accompanying notes are an integral part of these consolidated
financial statements.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31,
2009 2008
Revenue
Sales of systems $38,286,835 $8,048,956
Rental income 5,948,373 11,168,707
Total revenue 44,235,208 19,217,663
Cost of sales
Cost of systems 29,451,411 6,191,505
Rental expense 4,149,604 7,810,231
Total cost of sales 33,601,015 14,001,736
Gross profit 10,634,193 5,215,927
Interest income on sales-type leases 7,052,574 2,285,582
Total operating income 17,686,767 7,501,509
Operating expenses
General and administrative expenses 4,194,632 3,354,028
Total operating expenses 4,194,632 3,354,028
Income from operations 13,492,135 4,147,481
Non-operating income (expenses)
Interest income 88,852 27,033
Interest expense (475,995) (4,787,292)
Other income 13,597 108,999
Other expense (107,680) (811)
Exchange loss (2,766) (82,237)
Total non-operating expenses, net (483,992) (4,734,308)
Income (loss) before income tax 13,008,143 (586,827)
Income tax expense 2,946,387 1,632,754
Income (loss) from operations 10,061,756 (2,219,581)
Less: Income attributable to 352,480 83
noncontrolling interest
Net income (loss) 9,709,276 (2,219,664)
Other comprehensive item
Foreign currency translation gain 126,903 1,864,327
Comprehensive income (loss) $9,836,179 $(355,337)
Basic weighted average shares
outstanding 38,068,929 32,095,814
Diluted weighted average shares
outstanding ** 46,261,985 49,702,199
Basic net earnings per share * $0.26 $(0.07)
Diluted net earnings per share * $0.21 $(0.07)
* Interest expense on convertible notes are added back to net income for
the computation of diluted EPS.
* Basic and diluted loss per share are the same for 2008 because common
stock equivalent are anti-dilutive.
** Diluted weighted average shares outstanding includes estimated shares
will be converted from the Second Note issued on Apr 29, 2008 with
conversion price that is tied to audited 2009 after-tax profits.
The accompanying notes are an integral part of these consolidated
financial statements.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2009 AND 2008
Common stock Paid in Statutory
Shares Amount capital reserves
Balance at
January 1, 2008 25,015,089 25,015 19,070,908 832,467
Shares issued
for capital
contribution 11,410,005 11,410 14,020,848 --
Stock
compensation
expense related
to stock
options -- -- 1,436,533 --
Net loss for
the year -- -- -- --
Transfer to
statutory
reserves -- -- -- 486,819
Foreign
currency
translation
gain -- -- -- --
Balance at
December 31,
2008 36,425,094 $36,425 $34,528,289 $1,319,286
Shares issued
for capital
contribution 2,352,941 2,354 1,997,646 --
Compensation
expenses
related to
stock options
and warrants -- -- 1,793,228 --
Net income for
the year -- -- -- --
Transfer to
statutory
reserves -- -- -- 1,178,438
Foreign
currency
translation
gain -- -- -- --
Balance at
December 31,
2009 38,778,035 $38,779 $38,319,163 $2,497,724
Other Accumulated
comprehensive retained
income earning (deficit) Total
Balance at
January 1, 2008 1,718,260 (4,338,441) 17,308,209
Shares issued
for capital
contribution -- -- 14,032,258
Stock
compensation
expense related
to stock
options -- -- 1,436,533
Net loss for
the year -- (2,219,664) (2,219,664)
Transfer to
statutory
reserves -- (486,819) --
Foreign
currency
translation
gain 1,864,327 -- 1,864,327
Balance at
December 31,
2008 $3,582,587 $(7,044,924) $32,421,663
Shares issued
for capital
contribution -- -- 2,000,000
Compensation
expenses
related to
stock options
and warrants -- -- 1,793,228
Net income for
the year -- 9,709,276 9,709,276
Transfer to
statutory
reserves -- (1,178,438) --
Foreign
currency
translation
gain 126,903 -- 126,903
Balance at
December 31,
2009 $3,709,490 $1,485,914 $46,051,070
The accompanying notes are an integral part of these consolidated
financial statements.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
2009 2008
CASH FLOWS FROM OPERATING
ACTIVITIES:
Income (loss) including
noncontrolling interest $10,061,756 $(2,219,581)
Adjustments to reconcile net
income (loss) including
noncontrolling interest to
net cash provided by
operating activities:
Depreciation and amortization 35,121 18,079
Amortization of discount
related to conversion
feature of convertible note -- 4,684,932
Stock options and warrants
expense 1,793,228 1,436,533
Accrued interest on
convertible notes 184,530 105,480
Changes in deferred tax 2,085,709 823,407
(Increase) decrease in current
assets:
Interest receivable on
sales type lease (355,220) 61,856
Prepaid expenses 3,166,691 --
Prepaid equipment rent -- (3,796,985)
Other receivables (1,421,503) (66,659)
Increase (decrease) in current
liabilities:
Accounts payable 2,394,223 (1,245,854)
Unearned revenue (658,762) 647,948
Taxes payable (633,648) 707,013
Accrued liabilities and
other payables (928,089) 802,165
Net cash provided by operating
activities 15,724,036 1,958,334
CASH FLOWS FROM INVESTING
ACTIVITIES:
Restricted cash (1,461,060) --
Increase investment in
subsidiary (16,103) --
Gross investment in sales
type leases (18,796,831) (7,063,105)
Acquisition of property &
equipment (33,498) (115,350)
Construction in progress (34,596,172) (3,717,743)
Net cash used in investing
activities (54,903,664) (10,896,198)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Notes payable - bank
acceptances 1,461,060 --
Issuance of common stock 2,000,000 9,032,258
Convertible notes 3,000,000 5,000,000
Proceeds from loan (trust
plan) 25,559,947 --
Advance from (repayment to)
related party 739,720 (75,108)
Cash contribution from
noncontrolling interest 263,439 --
Net cash provided by financing
activities 33,024,166 13,957,150
EFFECT OF EXCHANGE RATE CHANGE
ON CASH & CASH EQUIVALENTS 61 613,718
NET INCREASE (DECREASE) IN CASH (6,155,401) 5,633,004
& CASH EQUIVALENTS
CASH & CASH EQUIVALENTS,
BEGINNING OF YEAR 7,267,344 1,634,340
CASH & CASH EQUIVALENTS, END OF
YEAR $1,111,943 $7,267,344
Supplemental Cash flow data:
Income tax paid $1,480,698 $152,881
Interest paid $358,789 $--
