China Natural Gas Announces First Quarter 2012 Financial Results

       China Natural Gas Announces First Quarter 2012 Financial Results  - First Quarter 2012 revenue increased by 33.9% year-over-year to $32.28 million -  PR Newswire  XI'AN, China, May 15, 2012  XI'AN, China, May 15, 2012 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (PINK: CHNG), a leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, today announced its financial results for the first quarter ended March 31, 2012.  First Quarter 2012 Results  Revenue in the first quarter of 2012 increased by 33.9% to $32.28 million from $24.11 million in the first quarter of 2011, driven by our LNG production facility in Jingbian County, Shaanxi Province started operations , and the increase in the number of residential and commercial pipeline customers from 115,787 to 117,270 over the period. Sales revenue of natural gas grew by 44.5% year-over-year to $29.40 million, from $20.35 million in the first quarter of 2011. Gasoline revenue in the first quarter of 2012 decreased by 36.8% to $0.83 million, from $1.31 million in the same period of the prior year, mainly because 3 gasoline stations were closed during the second quarter and fourth quarter of 2011. Installation and automobile conversion services revenue decreased by 16.4% year-over-year to $2.05 million, from $2.45 million a year ago. In the first quarter of 2012, sales of natural gas, gasoline, and installation and automobile conversion services contributed 91.1%, 2.6%, and 6.3% of total revenue, respectively.  Gross profit in the first quarter of 2012 increased 16.9% to $11.36 million from $9.72 million in the same period of the prior year. Gross margin in the first quarter of 2012 was 35.2%, compared to 40.3% a year ago. Gross margin decreased primarily due to the current lower gross margin level of our LNG business, as compared to the gross margins of those business lines making greatest contribution to revenue.  Operating income in the first quarter of 2012 was $3.70 million, an increase of 14.6% year-over-year from $3.23 million, primarily attributable to the realization of revenue and gross profit of LNG, which started in July 2011..  Income tax expense was $0.79 million at an effective tax rate of 28.9%, as compared to $0.96 million at an effective tax rate of 27.8% in the first quarter of 2011. The decrease was primarily due to lower income before income tax for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The effective income tax rate increased from 27.8% to 28.9% over this period, primarily attributable to foreign currency exchange loss related to the Abax Senior Notes, which was not subject to income tax because we had incurred a net operating loss for income tax purpose for the three months ended March 31, 2012.  Net income in the first quarter of 2012 decreased by 21.6% to $1.95 million, or $0.10 per diluted share, from $2.49 million, or $ 0.12 per diluted share, in the first quarter of 2011.  As of March 31, 2012, the Company had $7.01 million of cash and cash equivalents on hand, compared to $9.62 million of cash and cash equivalents as of December 31, 2011. The decrease was primarily attributable to the construction of the LNG plant and other projects, and the repayment of the loans from Shanghai Pudong Development Bank and of the principal of the Abax Senior Notes.  Net cash provided by operating activities was $7.42 million for the first quarter of 2012, as compared to net cash provided by operations of $2.46 million for the first quarter of 2011. The increase was primarily due to the decrease in prepaid expense and other current assets, and increase in unearned revenue, and adjustments for non-cash expense items, including depreciation and amortization expenses, offset mainly by the increase in advances to suppliers and in other receivables.  About China Natural Gas, Inc.  China Natural Gas (http://www.naturalgaschina.com ) transports and sells natural gas to vehicular fueling terminals, as well as commercial, industrial and residential customers through its distribution networks in China's Shaanxi and Henan Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 25 CNG fueling stations in Shaanxi Province, 12 CNG fuelling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) distribution and sales of CNG through Company-owned CNG fueling stations serving hybrid (natural gas/gasoline) powered vehicles; (2) installation, distribution and sales of piped natural gas to residential and commercial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) distribution and sales of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles at its automobile conversion workshops.  SAFE HARBOR: FORWARD-LOOKING STATEMENTS  This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. For example, statements about the future plans and goals of the JV with CNPC and its prospects are forward looking and subject to risks. China Natural Gas, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statements on Forms S-1 and S-3, in each case as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.  This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.    CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)                                                 March31,       December31,                                                 2012            2011 ASSETS CURRENT ASSETS: Cash and cash equivalents                       $ 7,007,512     $ 9,622,883 Restricted cash                                   792,000         - Accounts receivable, net                          1,780,849       2,997,845 Other receivables, net                            1,457,428       540,646 Employee advances                                 375,733         285,270 Inventories                                       1,827,300       1,938,754 Advances to suppliers                             7,522,638       4,540,139 Prepaid expense and other current assets          1,356,542       4,470,687 Total current assets                              22,120,002      24,396,224 Investment in unconsolidated joint ventures       1,584,000       1,574,000 Property and equipment, net                       190,730,403     174,097,754 Construction in progress                          40,193,213      45,882,320 Deferred financing cost, net                      414,876         517,334 Goodwill                                          633,730         629,729 Other intangible assets                           20,256,737      18,910,244 Prepaid expenses and other assets                 4,383,267       10,976,203 TOTAL ASSETS                                    $ 280,316,228   $ 276,983,808 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Senior notes- current maturities                $ 13,164,008    $ 9,671,682 Current portion of bank loan payable              5,544,000       4,722,000 Accounts payable and accrued liabilities          8,756,354       7,694,423 Other payable - related party                     1,734,633       787,000 Short-term borrowing - related party              2,679,945       1,359,945 Unearned revenue                                  5,664,122       4,280,594 Accrued interest                                  544,726         1,029,431 Taxes payable                                     2,055,813       2,626,271 Total current liabilities                         40,143,601      32,171,346 LONG-TERM LIABILITIES: Senior notes, net of current portion              19,746,011      25,791,151 Bank loan payable, net of current portion         7,920,000       9,444,000 Borrowings - related party                        -               1,320,000 Warrants liability                                17,500,000      17,500,000 Total long-term liabilities                       45,166,011      54,055,151 Total liabilities                                 85,309,612      86,226,497 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $0.0001 per share, 5,000,000 authorized,                             -               -  none issued and outstanding Common stock, par value $0.0001 per share, 45,000,000 authorized,  21,458,654 and 21,458,654 issued and           2,145           2,145 outstanding at March 31, 2012  and December 31, 2011, respectively Additional paid-in capital                        83,057,523      82,909,485 Accumulated other comprehensive income            21,576,294      19,817,493 Statutory reserves                                10,529,185      10,124,710 Retained earnings                                 79,674,808      77,903,478 Total China Natural Gas, Inc. stockholders'      194,839,955     190,757,311 equity Noncontrolling interests                          166,661         - Total stockholders' equity                        195,006,616     190,757,311 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 280,316,228   $ 276,983,808        CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)                                          For the Three Months Ended March 31,                                          2012                  2011 Revenue Natural gas                              $   29,399,687        $  20,347,829 Gasoline                                     825,895              1,307,174 Installation and other                       2,051,736            2,453,105                                              32,277,318           24,108,108 Cost of revenue Natural gas                                  19,274,859           12,099,451 Gasoline                                     788,144              1,224,724 Installation and other                       852,245              1,063,632                                              20,915,248           14,387,807 Gross profit                                 11,362,070           9,720,301 Operating expenses Selling                                      4,950,800            3,579,921 General and administrative                   2,711,646            2,910,971                                              7,662,446            6,490,892 Income from operations                       3,699,624            3,229,409 Other income (expense) Interest income                              10,746               6,649 Interest expense                             (432,037)            (4,668) Other income (expense), net                  (33,093)             96,956 Change in fair value of warrants             (83)                 116,180 Foreign currency exchange loss               (505,940)            (3,042)                                              (960,407)            212,075 Income before income tax                     2,739,217            3,441,484 Provision for income tax                     791,471              955,653 Net income                                   1,947,746            2,485,831 Less: Loss attributable to                   (228,059)            - noncontrolling interests Net income attributable to China             2,175,805            2,485,831 Natural Gas, Inc. Other comprehensive income Foreign currency translation gain            1,758,800            1,448,655 Comprehensive income                     $   3,934,605         $  3,934,486 Weighted average shares outstanding Basic                                        21,458,654           21,321,904 Diluted                                      21,458,654           21,358,755 Earnings per share Basic                                    $   0.10              $  0.12 Diluted                                  $   0.10              $  0.12      CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)                                            FortheThreeMonthsEndedMarch31,                                          2012                  2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income attributable to China         $  2,175,805          $  2,485,831 Natural Gas, Inc. Add: Loss attributable to                   (228,059)             - noncontrolling interests Net income                                  1,947,746             2,485,831 Adjustments to reconcile net income to net cashprovided by operating activities: Depreciation and amortization               3,411,668             1,821,365 (Recovery of) Provision for doublful        284,740               264,367 accounts Stock-based compensation                    148,038               160,897 Change in fair value of warrants            83                    (116,180) Change in assets and liabilities: Accounts receivable                         1,272,022             (598,060) Other receivables                           (1,196,797)           15,304 Employee advances                           (88,962)              35,837 Inventories                                 124,084               (464,199) Advances to suppliers                       (2,961,113)           (673,722) Prepaid expense and other current           3,195,216             (580,447) assets Accounts payable and accrued                997,587               (97,201) liabilities Unearned revenue                            1,359,757             (569,659) Accrued interest                            (484,705)             (141,855) Taxes payable                               (588,625)             915,305 Net cash provided by operating              7,420,739             2,457,583 activities CASH FLOWS FROM INVESTING ACTIVITIES: Payment for acquisition of property and     (3,192,954)           (105,124) equipment Additions to construction in progress       (4,744,279)           (4,845,643) Prepayment on long-term assets              4,962,691             (687,313) Payment for acquisition of business         (657,421)             - Payment for intangible assets               (1,506,029)           (71,138) Net cash used in investing activities       (5,137,992)           (5,709,218) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term debt and other     -                     2,081,000 payable, related parties Repayment of long-term debt                 (794,000)             - Repayment of senior notes                   (3,333,334)           - Increase in restricted cash                 (794,000)             - Net cash (used in) provided by              £¨4,921,334£©         2,081,000 financing activities Effect of exchange rate changes on cash     23,216                55,550 and cash equivalents NET DECREASE IN CASH AND CASH               (2,615,371)           (1,115,085) EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF     9,622,883             10,046,249 PERIOD CASH AND CASH EQUIVALENTS, END OF        $  7,007,512          $  8,931,164 PERIOD SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, including capitalized     $  1,194,334          $  1,406,911 interest Income taxes paid                        $  1,143,667          $  - Non-cash transactions for investing and financing activities: Construction materials transferred to    $  67,185             $  4,960,793 Construction in progress Construction in progress transferred to  $  15,506,551         $  - property and equipment Advances to suppliers transferred to     $  -                  $  7,480,412 construction in progress Capitalized interest - amortization of discount of notes payable and issuance   $  1,016,672          $  1,016,146 cost Other assets transferred to              $  671,615            $  545,354 construction in progress    For more information, please contact:  China Natural Gas, Inc. Zhaoyang Qiao, CFO Phone: +86-29-8832-7391 Email: qiaochaoyang@naturalgaschina.com  Jackie Shi Investor Relations Director Phone: +86-29-8832-3325 x922 Cell: +86-139-9287-9998 Email: yjshi@naturalgaschina.com    SOURCE China Natural Gas, Inc.  
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