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Cleantech Solutions International Reports Third Quarter 2012 Results

     Cleantech Solutions International Reports Third Quarter 2012 Results

PR Newswire

WUXI, China, Nov. 13, 2012

WUXI,China, Nov. 13, 2012 /PRNewswire-FirstCall/ --Cleantech Solutions
International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a
manufacturer of metal components and assemblies, primarily used in the wind
power, solar, dyeing and finishing equipment and other clean technology
industries, today announced its financial results for the three and nine
months ended September 30, 2012.

"Against a weak macro-economic background, we are very pleased to have
achieved 48.5% growth in revenues and 107.5% growth in net income during the
third quarter of 2012. Our performance was driven by a sharp improvement in
demand for our next generation of dyeing machines as well as solid growth in
forged products for non-wind applications," commented Mr. Jianhua Wu, Chairman
and Chief Executive Officer of Cleantech Solutions. "Profitability improved
due to expansion of our gross margins to 24.9%, as well as strict controls
over operating expenses. With an increasingly diversified portfolio of
precision products, we believe we have greater flexibility to adjust to
fluctuations in our served markets so as to optimize our performance," added
Mr. Wu.

Third Quarter 2012 Results

Revenue for the third quarter of 2012 increased 48.5% to $17.3 million,
compared to $11.7 million for the same period of 2011. Sequentially, revenue
increased 35.2% compared to the second quarter of 2012.

Revenue from the sale of forged rolled rings to the wind power industry and
other industries increased 29.1% to $9.8 million, or 56.7% of net revenue,
compared to $7.6 million, or 65.2% of net revenue, in the same period last
year. The increase in revenue was mainly due to improving market demand for
capital equipment related to the Company's forged rolled rings and related
products for other industries, which was counterbalanced by continued weak
demand in the wind industry due to overcapacity, vertical integration by
turbine manufacturers, and reduced government subsidies.

The increase in revenue is summarized as follows:

  oRevenue from the sale of forged rolled rings exclusively to the wind power
    industry decreased by 28.4% to $3.2 million, representing 18.5% of net
    revenue, compared to $4.5 million, or 38.5% of net revenue, in the
    comparable period last year.
  oRevenue from the sale of forged rolled rings to other industries increased
    112.1% to $6.6 million, or 38.2% of net revenue, compared with $3.1
    million, or 26.7% of net revenue for the comparable period of the prior
    year.

Revenue from the Company's dyeing and finishing equipment segment increased
84.8% to $7.5 million, or 43.3% of net revenues, compared to $4.1 million, or
34.8% of net revenue, for the third quarter of 2011. This increase was largely
attributable to the dyeing industry's response to local government's policies
which encourage the purchase of low-emission airflow dyeing machines.

Gross profit for the third quarter of 2012 increased 64.2% to $4.3 million,
compared to $2.6 million for the same period in 2011. Gross margin increased
to 24.9% during the third quarter of 2012 compared to 22.5% for the same
period a year ago. The increase in gross margin was attributable to improved
operational and cost efficiencies in the forged rolled rings and related
products segment, including the allocation of fixed costs such as depreciation
to cost of revenues as the Company operated at higher production levels. Gross
margin for the dyeing and finishing equipment segment also improved due to the
higher ASPs for our next-generation dyeing equipment.

Operating expenses increased 11.6% to $1.1 million, compared to $1.0 million
in the comparable period last year. The increase was primarily due to an
increase in depreciation, related to the equipment for ESR production,
partially compensated for by reduced bad debt expenses.

Selling, general and administrative expenses for the three months ended
September 30, 2012 decreased 19.0% to $0.7 million, as compared to $0.9
million for the three months ended September 30, 2011.

Operating income increased 96.3% to $3.2 million, compared to $1.6 million for
the same period of 2011. Operating margin was 18.5% compared to 14.0% in the
third quarter last year.

Other expense was $26,446 compared to other expense of $47,552 for the same
period in 2011. The decrease was due to an increase in other income, offset by
higher interest expense as a result of increase in debt and capital lease
obligations.

Adjusted EBITDA, a non-GAAP measurement, which excludes interest, taxes,
warrant modification expense, depreciation and amortization, was up 74.5% to
$4.9 million, compared to $2.8 million in the same quarter last year.

Net income for the third quarter of 2012 was $2.4 million, or $0.88 diluted
earnings per share, compared to $1.1 million, or $0.46 diluted earnings per
share, in the third quarter of 2011. Diluted earnings per share were
calculated using diluted weighted average shares of 2,667,017 and 2,462,159
for the three months ended September 30, 2012 and 2011, respectively.All
share and per share information has been adjusted to reflect a one-for-ten
reverse stock split effective March 6, 2012.

Results for Nine Months

For the nine months ended September 30, 2012, revenues decreased 5.4% to $39.6
million from $41.9 million in 2011. Gross profit decreased 13.1% to $8.9
million, compared to $10.2 million last year. Gross margin for the nine months
ended September 30, 2012 was 22.5%, compared to 24.5% in the corresponding
period of 2011. Operating income decreased 19.2% to $5.6 million from $7.0
million in 2011. Adjusted EBITDA was $10.5 million, compared to $10.8 million
in the same period last year. Net income was $3.7 million, or $1.42 per
diluted share, a 25.0% decrease from $5.0 million, or $1.98 per diluted share,
in the year ago period. All share and per share information has been adjusted
to reflect a one-for-ten reverse stock split effective March 6, 2012.

Financial Condition

As of September 30, 2012, Cleantech Solutions held cash and cash equivalents
of $1.0 million compared with $1.2 million at December 31, 2011.Accounts
receivable were $10.5 million and total current assets of $19.6 million. The
Company had $2.7 million in short-term bank loans payable and stockholders'
equity was $76.4 million. In the first nine months of 2012, the Company
generated $5.8 million in cash flow from operations.

Subsequent Events

On October 10, 2012 the Company announced that it has received new and
follow-on purchase orders to supply 23 units of airflow dyeing machines and
related components to domestic customers, for an aggregate amount of $2.2
million.

On October 31, 2012 the Company announced that it has received a new purchase
order to supply 63 units of airflow dyeing machines and related components to
a domestic customer for a purchase price of $1.7 million.

Business Outlook

"We had a very successful quarter, despite the significant challenges that are
facing both the wind energy and the solar industry in the near term. Growth of
our forged products for non-wind applications has been very strong, and we are
exploring additional markets, including petroleum and petrochemical
industries. We are also excited about the new opportunities presented in
China's solar industry, which is expected to undergo some major change
following recent supportive government policies, and we are also expanding our
range to include high performance components for production equipment
targeting smart phones and LED lighting. In the dyeing and finishing equipment
segment, we are benefiting from a major upgrade cycle, as manufacturers
embrace our more energy efficient and environmentally friendly technology. We
anticipate strong growth potential in 2013 with the expected launch of our new
after-treatment equipment, which is in the late stages of research and
development.

"Thanks to improving volumes and strong expense controls, our margins improved
dramatically in the third quarter. In the next few quarters, we continue to
foresee a slight increase in our margins, as raw material costs are not
expected to have great fluctuations given the general weak economy. We have
been generating positive cash flow from operations and believe they are
sufficient to fund our new product development initiatives," Mr. Wu concluded.

Conference Call

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Time
on November 15, 2012 to discuss financial results for the third fiscal quarter
ended September 30, 2012.

To participate in the live conference call, please dial the following number
five to ten minutes prior to the scheduled conference call time: (866)
759-2078. International callers should dial (706) 643-0585. When prompted,
please enter conference passcode: 69519396.

If you are unable to participate in the conference call at this time, a replay
will be available for 14 days starting on November 15, 2012 at 12:00 noon ET.
To access the replay, dial (855) 859-2056. International callers dial (404)
537-3406, and enter passcode: 69519396.

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial
measures. The Company believes that both management and investors benefit from
referring to these non-GAAP financial measures in assessing the performance of
the Company and when planning and forecasting future periods. Readers are
cautioned not to view non-GAAP financial measures on a stand-alone basis or as
a substitute for GAAP measures, or as being comparable to results reported or
forecasted by other companies, and should refer to the reconciliation of GAAP
measures with non-GAAP measures also included herein.

About Cleantech Solutions International

Cleantech Solutions is a manufacturer of metal components and assemblies,
primarily used in clean technology industries. The Company supplies forging
products, fabricated products and machining services to a range of clean
technology customers, primarily in the wind power sector and supplies dyeing
and finishing equipment to the textile industry. Cleantech Solutions is
committed to achieving long-term growth through ongoing technological
improvement, capacity expansion, and the development of a strong customer
base. The Company's website is www.cleantechsolutionsinternational.com. Any
information on the Company's website or any other website is not a part of
this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the
business of the Company and its subsidiary and affiliated companies. These
forward looking statements are often identified by the use of forward-looking
terminology such as "believes," "expects" or similar expressions. Such forward
looking statements involve known and unknown risks and uncertainties that may
cause actual results to be materially different from those described herein as
anticipated, believed, estimated or expected. 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, including factors described in "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Form 10-K for the year ended December 31, 2011 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Form 10-Q for the quarter ended September 30, 2012. All
forward-looking statements attributable to the Company or to 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.

Company Contact:

Ms. Wanfen Xu                                  Crocker Coulson
Chief Financial Officer                        CCG Investor Relations
Cleantech Solutions International, Inc.         Tel: +1 646 213 1915
Email:                                          Email:
xu_wf@cleantechsolutionsinternational.com       Crocker.coulson@ccgir.com,
Web: www.cleantechsolutionsinternational.com    Web: www.ccgirasia.com

- Financial Tables Follow-

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                          September 30,     December 31,
                                          2012              2011
                                        (Unaudited)          (Audited)
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents           $     955,405   $    1,152,607
 Restricted cash                     -                    314,233
 Notes receivable                    165,772              53,420
 Accounts receivable, net of         10,533,490           7,087,958
allowance for doubtful accounts
 Inventories, net of reserve for     6,220,634            4,276,090
obsolete inventory
 Advances to suppliers               847,216              219,347
 Prepaid VAT on purchases            675,448              1,512,213
 Prepaid expenses and other          179,826              110,670
 Total Current Assets            19,577,791           14,726,538
PROPERTY AND EQUIPMENT - net            65,965,819           64,042,079
OTHER ASSETS:
 Land use rights, net                 3,769,058            3,820,536
 Total Assets                    $   89,312,668    $   82,589,153
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Short-term bank loans               $    2,683,928   $    2,356,749
 Bank acceptance notes payable       -                    314,233
 Accounts payable                    6,329,876            4,997,109
 Accrued expenses                    725,423              771,597
 Capital lease obligations- current  249,597              244,747
portion
 Advances from customers             1,840,352            1,166,942
 Income taxes payable                884,003              592,202
 Total Current Liabilities       12,713,179           10,443,579
OTHER LIABILITIES:
 Capital lease obligations - net of  174,123              381,235
current portion
 Total Liabilities              12,887,302           10,824,814
STOCKHOLDERS' EQUITY:
 Preferred stock $0.001 par value
(30,000,000 shares authorized, all of
which
 were designated as series A
convertible preferred, 0 and 10,995,807
shares
 issued and outstanding at
September 30, 2012 and December 31,     -                    10,996
2011, respectively)
 Common stock ($0.001 par value;
50,000,000 shares authorized;
 2,667,017 and 2,101,849 shares
issued and outstanding
 at September 30, 2012 and        2,667                2,102
December 31, 2011, respectively)
 Additional paid-in capital          28,089,776           27,489,600
 Retained earnings                   38,128,307           34,618,341
 Statutory reserve                   2,283,852            2,064,551
 Accumulated other comprehensive
gain - foreign currency translation     7,920,764            7,578,749
adjustment
 Total Stockholders' Equity      76,425,366           71,764,339
 Total Liabilities and           $   89,312,668    $   82,589,153
Stockholders' Equity



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
`                      For the Three Months Ended    For the Nine Months Ended
                       September 30,                 September 30,
                       2012           2011           2012          2011
                       (Unaudited)    (Unaudited)    (Unaudited)   (Unaudited)
REVENUES               $ 17,343,723   $ 11,676,696   $            $
                                                     39,585,815    41,851,257
COST OF REVENUES       13,024,265     9,046,015      30,689,436    31,617,025
GROSS PROFIT           4,319,458      2,630,681      8,896,379     10,234,232
                       0.249050218    0.225293268    0.225         0.245
OPERATING EXPENSES:
 Depreciation      373,896        84,531         1,122,432     505,326
 Selling,
general and            739,386        913,198        2,157,053     2,773,694
administrative
 Total          1,113,282      997,729        3,279,485     3,279,020
Operating Expenses
INCOME FROM            3,206,176      1,632,952      5,616,894     6,955,212
OPERATIONS
                       0.184860886    0.139847094
OTHER INCOME
(EXPENSE):
 Interest income   5,069          110            10,919        940
 Interest          (84,289)       (60,452)       (244,685)     (122,980)
expense
 Foreign           1,251          (1,476)        6,642         (4,817)
currency gain (loss)
 Warrants          -              -              (235,133)     -
modification expense
 Other income      51,523         14,266         64,803        91,379
 Total Other    (26,446)       (47,552)       (397,454)     (35,478)
Income (Expense)
INCOME BEFORE INCOME   3,179,730      1,585,400      5,219,440     6,919,734
TAXES
INCOME TAXES           824,628        450,410        1,490,173     1,949,625
NET INCOME             $  2,355,102  $  1,134,990  $            $ 
                                                     3,729,267    4,970,109
COMPREHENSIVE
INCOME:
 NET INCOME       $  2,355,102  $  1,134,990  $            $ 
                                                     3,729,267    4,970,109
 OTHER
COMPREHENSIVE
INCOME:
 Unrealized
foreign currency       (169,625)      655,213        342,015       2,145,996
translation (loss)
gain
 COMPREHENSIVE    $  2,185,477  $  1,790,203  $            $ 
INCOME                                               4,071,282    7,116,105
NET INCOME PER
COMMON SHARE:
 Basic              $          $         $        $     
                       0.88          0.57           1.51         2.57
 Diluted            $          $         $        $     
                       0.88          0.46           1.42         1.98
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
 Basic              2,667,017      1,997,674      2,469,818     1,937,028
 Diluted            2,667,017      2,462,159      2,617,798     2,512,637



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            For the Nine Months Ended
                                            September 30,
                                            2012                2011
                                            (Unaudited)         (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                 $  3,729,267      $ 4,970,109
 Adjustments to reconcile net income from
 operations to net cash
    provided by operating activities:
    Depreciation                            4,719,769           3,651,168
    Amortization of land use rights         70,068              68,145
    (Decrease) increase in allowance for    (46,616)            389,120
    doubtful accounts
    Warrants modification expense           235,133             -
    Stock-based compensation expense        129,030             282,259
 Changes in assets and liabilities:
    Notes receivable                        (112,209)           (96,409)
    Accounts receivable                     (3,368,092)         (70,783)
    Inventories                             (1,925,810)         (1,935,112)
    Prepaid value-added taxes on purchases  844,969             814,967
    Prepaid and other current assets        (41,315)            (48,340)
    Advances to suppliers                   (627,455)           (495,317)
    Accounts payable                        1,310,123           (2,741,480)
    Accrued expenses                        (49,578)            58,098
    VAT and service taxes payable           -                   (82,941)
    Income taxes payable                    289,230             (712,490)
    Advances from customers                 668,446             1,839,882
NET CASH PROVIDED BY OPERATING ACTIVITIES   5,824,960           5,890,876
CASH FLOWS FROM INVESTING ACTIVITIES:
    Payments for deposit on equipment       -                   (768,520)
    Purchase of property and equipment      (6,334,776)         (6,413,874)
NET CASH USED IN INVESTING ACTIVITIES       (6,334,776)         (7,182,394)
CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on capital lease     (205,509)           (143,545)
    Proceeds from bank loans                2,686,706           2,612,969
    Repayment of bank loans                 (2,370,623)         (2,151,857)
    Decrease (increase) in restricted cash  316,083             (461,112)
    (Decrease) increase in bank acceptance  (316,083)           461,112
    notes payable
    Proceeds from sale of common stock      -                   125,000
    Proceeds from exercise of warrants      198,142             400,000
NET CASH PROVIDED BY FINANCING ACTIVITIES   308,716             842,567
EFFECT OF EXCHANGE RATE ON CASH AND CASH    3,898               20,048
EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS   (197,202)           (428,903)
CASH AND CASH EQUIVALENTS - beginning of    1,152,607           947,177
period
CASH AND CASH EQUIVALENTS - end of period   $   955,405      $   518,274
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid for:
                 Interest                   $   244,685      $   122,980
                 Income taxes               $  1,200,944      $ 2,662,115
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
 Security deposit and leased property in    $        -  $   795,022
 exchange for capital lease obligations
 Series A preferred converted to common     $    13,198     $    3,536
 shares
 Common stock issued for future service     $    27,440     $   63,576



Reconciliation of Net Income to Adjusted EBITDA
(Amounts expressed in US$)
                        For the Three Months Ended   For the Nine Months Ended
                        September 30,                September 30,
                        2012            2011         2012           2011
Net income           $  2,355,102   $   1,134,990  $ 3,729,267   $  4,970,109
Add: income tax         824,628         450,410      1,490,173      1,949,625
Add: interest           84,289          60,452       244,685        122,980
expense
Add: warrant            -               -            235,133        -
modification expense
Add: depreciation and   1,650,599       1,170,416    4,789,837      3,719,313
amortization
EBITDA               $  4,914,618   $   2,816,268  $ 10,489,095  $  10,762,027

SOURCE Cleantech Solutions International, Inc.

Website: http://www.cleantechsolutionsinternational.com
Website: http://www.ccgirasia.com
 
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