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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