China Natural Gas Announces Year End 2012 Financial Results - 2012 Revenue Increases 17.0% Y o Y to $145.3 Million - 2012 Gross Profit Increases 2.7% Y o Y to $49.5 Million PR Newswire NEW YORK, April 1, 2013 NEW YORK, April 1, 2013 /PRNewswire/ -- 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 year ended December 31, 2012. Fiscal year 2012 Results Revenue for the year ended December 31, 2012 increased 17.0% to $145.3 million from $124.2 million for the year ended December 31, 2011, primarily attributable to the increase of revenue from LNG, which started in July 2011, and we operated LNG plant for the whole year of 2012. Sales of natural gas grew approximately 24.6% year-over-year to $132.3 million, from $106.2 million for the year ended December 31, 2011, mainly due to our LNG business. Gasoline revenue for the year ended December 31, 2012 decreased 53.6% to $2.8 million, from $6.0 million in the prior year's period, because of the closure of two gasoline fueling stations during the fourth quarter of 2011 and one gasoline fueling stations during the fourth quarter of 2012 due to the low gross margin of gasoline. Installation and services revenue decreased 15.0% year-over-year to $10.2 million, from $12.0 million a year ago. For the year ended December 31, 2012, sales of natural gas, gasoline, and installation and other services contributed 91.0%, 1.9%, and 7.1% of total revenue, respectively. Gross profit for the year ended December 31, 2012 expanded 2.7% to $49.5 million, from $48.2 million in the same period of 2011, the increase in gross profit was primarily attributable to the increase in revenue from LNG, offset by the decrease in natural gas revenue from our fueling stations. Gross margin for the year ended December 31, 2012 was 34.1%, compared to 38.8% a year ago, 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. In total, operating expenses for the year ended December 31, 2012 increased by approximately $2.4 million to $29.7 million, from $27.4 million in the same period of 2011. The increase in operating expenses primarily due to the increase of transportation expense and depreciation mainly associated with our LNG business, which started in July 2011. Operating income for the year ended December 31, 2012 was $19.8 million, a decrease of 5.0% year-over-year, from $20.9 million in the same period of 2011. During the year ended December 31, 2012, the Company recognized $4 of non-cash gain from the change in the fair value of warrants, compared to $252,062 in the same period of 2011. Income tax expense was $3.2 million at an effective tax rate of 22.6%, as compared to an effective tax rate of 24.0% for the year ended December 31, 2011. Net income for the year ended December 31, 2012 decreased 27.7% to $11.0 million, or $0.52 per diluted share, from $15.3 million, or $0.71 per diluted share, for the year ended December 31, 2011, primarily due to the loss of $4,0 million on disposal of five fueling stations during the third quarter of 2012. Excluding the impact of the non-cash expenses (see "About Non-GAAP Financial Measures" below), adjusted net income was $11.0 million, versus $15.3 million for the year ended December 31, 2011. For year ended December 31, 2012, adjusted earnings per diluted share was $0.51, versus $0.70 per diluted share for the year ended December 31, 2011. Mr. Shuwen Kang, CEO of China Natural Gas, commented, "We are very pleased with our strong growth and profitability for the year ended December 31, 2012. During this year, we increased our number of pipeline customers to 122,020 and we have expanded into liquefied natural gas ("LNG") business. We continued to see higher sales volumes resulting from the increasing number of hybrid vehicle fleet and municipal vehicles in the city of Xi'an, which utilize compressed natural gas as a cleaner, cheaper and more efficient fuel alternative. We believe our strong performance in 2012 demonstrated the long-term market potentials for our CNG gas stations as well as our LNG business, piped natural gas and installation services for residential, commercial and industrial customers." Financial Highlights for the Fiscal Year 2012: oRevenue increased by 17.0% to $145.3 million, primarily attributable to the realization of revenue from LNG, which started in July 2011; oGross profit increased by 2.7% to $49.5 million; oNon-GAAP net income of $11.0 million, or $0.51 per diluted share. Balance Sheet As of December 31, 2012, the Company had cash and cash equivalents of $10.9 million, compared with $9.6 million as of December 31, 2011. Mr. Kang concluded, "We remain optimistic about the market growth and potentials for natural gas usage in the developing Shaanxi, Henan and Hubei provinces. In future, we will focus on sales to fleet fueling vehicles and fueling boat. We are confident that our strong balance sheet, our current infrastructure, technical expertise and strategic LNG expansions will help sustain our steady growth and profitability. We also continue to remain optimistic about the long-term opportunities in the LNG market as China aims to increase natural gas usage. On July 16, 2011, we completed most of the construction of Phase I of the LNG plant and began commercial production and sale of LNG. The launch of the LNG plant is an important part of our integration strategies, which include strategic plans to develop our own network of LNG fueling stations in Shaanxi, Henan and Hubei Provinces." 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, Henan and Hubei Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 20 CNG fueling stations in Shaanxi Province, 10 CNG fuelling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; (2) the installation, distribution and sale of piped natural gas to residential, commercial and industrial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) the distribution and sale of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division. About Non-GAAP Financial Measures This press release contains non-GAAP financial measures for earnings that exclude the effect of non-cash non-operating expense related to the Senior Notes issued in January and March 2008 as well as change in fair market value of the Company's outstanding warrants. China Natural Gas' management uses those non-GAAP financial measures when it internally evaluates the performance of business and makes operating decisions, including internal budgeting and performance measurement. China Natural Gas 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 China Natural Gas' financial performance in comparison to historical periods, and it allows investors to evaluate China Natural Gas' performance using the same methodology and information as that used by China Natural Gas' 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. The Company has provided a reconciliation table of the non-GAAP measure to the equivalent GAAP measure. CHINA NATURAL GAS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011 For the year ended December 31 2012 2011 GAAP Net Income 11,037,267 15,261,932 Add: Amortization of discount on senior - - notes Amortization of deferred offering - - costs Change in fair value of warrants (4) (252,062) Non-GAAP Net Income 11,037,263 15,009,870 (Excludes all non-cash items) Weighted average shares outstanding Basic 21,458,654 21,418,389 Diluted 21,458,654 21,418,389 GAAP Basic EPS 0.51 0.71 Add: Amortization of discount on senior 0.0000 0.0000 notes Amortization of deferred offering 0.0000 0.0000 costs Change in fair value of warrants 0.0000 (0.0118) Non-GAAP Basic EPS 0.51 0.70 GAAP Diluted EPS 0.51 0.71 Add: Amortization of discount on senior 0.0000 0.0000 notes Amortization of deferred offering 0.0000 0.0000 costs Change in fair value of warrants 0.0000 (0.0118) Non-GAAP Diluted EPS 0.51 0.70 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 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2012 and 2011 (Stated in US Dollars) As of December 31, 2012 2011 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,857,456 $ 9,622,883 Accounts receivable, net 2,148,379 2,997,845 Other receivables, net 458,605 540,646 Employee advances 399,031 285,270 Inventories 2,473,933 1,938,754 Advances to suppliers 4,869,606 4,540,139 Prepaid expense and other current assets 3,541,431 4,470,687 Total current assets 24,748,441 24,396,224 Investment in unconsolidated joint ventures 1,587,000 1,574,000 Property and equipment, net 179,515,563 174,097,754 Construction in progress 53,393,933 45,882,320 Deferred financing cost, net - 517,334 Goodwill 839,806 629,729 Other intangible assets 21,400,924 18,910,244 Prepaid expenses and other assets 7,015,142 10,976,203 TOTAL ASSETS $ 288,500,809 $ 276,983,808 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Senior notes- current maturities $ 38,352,498 $ 9,671,682 Current portion of bank loan payable 4,761,000 4,722,000 Redeemable liabilities - warrants 17,500,000 - Accounts payable and accrued liabilities 6,756,278 7,694,423 Other payable - related party 1,616,429 787,000 Short-term borrowing - related party 2,679,945 1,359,945 Unearned revenue 3,663,570 4,280,594 Accrued interest 1,936,584 1,029,431 Taxes payable 2,232,546 2,626,271 Total current liabilities 79,498,850 32,171,346 LONG-TERM LIABILITIES: Senior notes, net of current portion - 25,791,151 Bank loan payable, net of current portion 4,761,000 9,444,000 Borrowings - related party - 1,320,000 Warrants liability - 17,500,000 Total long-term liabilities 4,761,000 54,055,151 Total liabilities $ 84,259,850 $ 86,226,497 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 issued and outstanding at December 2,145 2,145 31, 2012 and 2011 Additional paid-in capital 83,501,637 82,909,485 Accumulated other comprehensive income 21,276,931 19,817,493 Statutory reserves 11,818,087 10,124,710 Retained earnings 87,410,615 77,903,478 Noncontrolling interests 231,544 - Total stockholders' equity 204,240,959 190,757,311 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 288,500,809 $ 276,983,808 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2012 and 2011 (Stated in US Dollars) YearsEndedDecember31, 2012 2011 Revenue Natural gas $ 132,255,499 $ 106,178,398 Gasoline 2,782,062 5,998,022 Installation and other 10,243,727 12,045,106 145,281,288 124,221,526 Cost of revenue Natural gas 88,790,622 65,062,505 Gasoline 2,626,569 5,756,960 Installation and other 4,327,203 5,183,985 95,744,394 76,003,450 Gross profit 49,536,894 48,218,076 Operating expenses Selling 22,266,885 17,377,703 General and administrative 7,456,049 9,984,565 29,722,934 27,362,268 Income from operations 19,813,960 20,855,808 Non-operating income (expense): Interest income 68,472 42,290 Interest expense (1,248,842) (771,916) Loss on disposal of fixed assets (4,020,260) - Other income (expense), net 144,464 126,100 Change in fair value of warrants 4 252,062 Foreign currency exchange loss (499,575) (430,723) (5,555,737) (782,187) Income before income tax 14,258,223 20,073,621 Provision for income tax 3,220,954 4,811,689 Net income 11,037,269 15,261,932 Less: Loss (income) attributable to (163,245) - noncontrolling interests Net income attributable to 11,200,514 15,261,932 China Natural Gas, Inc. Other comprehensive income Foreign currency translation gain 1,459,438 4,150,348 Comprehensive income $ 12,659,952 $ 19,412,280 Weighted average shares outstanding Basic 21,458,654 21,418,389 Diluted 21,458,654 21,418,389 Earnings per share Basic $ 0.52 $ 0.71 Diluted $ 0.52 $ 0.71 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS As of December 31, 2012 and 2011 (Stated in US Dollars) FortheYearsendedDecember31, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 11,037,269 15,261,932 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,025,863 9,600,518 Provision for (recovery of) doubtful accounts 197,942 110,166 Loss (Gain) on disposal of equipment 4,020,260 (3,385) Stock-based compensation 592,152 627,660 Change in fair value of warrants (4) (252,062) Change in assets and liabilities: Accounts receivable 992,933 (1,201,079) Other receivables (194,338) (339,941) Employee advances (111,449) 27,679 Inventories (146,105) (860,723) Advances to suppliers (846,886) (2,729,776) Prepaid expense and other current assets 1,407,530 (133,968) Accounts payable and accrued liabilities (1,136,395) 2,064,383 Unearned revenue (651,968) 1,787,063 Accrued interest 907,153 382,903 Taxes payable (415,154) 137,886 Net cash provided by operating activities 29,678,803 24,479,256 CASH FLOWS FROM INVESTING ACTIVITIES: Payment for acquisition of property and equipment (4,780,369) (7,314,640) Proceeds from sales of property and equipment 2,852,712 16,990 Additions to construction in progress (14,604,880) (11,769,752) Prepayment on long-term assets (1,164,454) (1,169,313) Payment for acquisition of business (656,593) (976,500) Payment for intangible assets (1,813,996) (189,843) Net cash used in investing activities (20,167,580) (21,403,058) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options - 670,075 Proceeds from short-term borrowing and other payable, - 3,454,945 related parties Repayment of long -term debt (4,758,000) (4,650,000) Repayment of senior notes (3,333,334) (3,333,334) Net cash (used in) provided by financing activities (8,091,334) (3,858,314) Effect of exchange rate changes on cash and cash (185,316) 358,750 equivalents NET INCREASE (DECREASE) IN CASH & CASH 1,234,573 (423,366) EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF 9,622,883 10,046,249 YEAR CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,857,456 $ 9,622,883 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net of capitalized interest $ 941,966 $ 742,224 Income taxes paid $ 3,422,353 $ 4,683,774 Non-cash transactions for investing and financing activities: Construction material transferred to construction in progress $ 67,100 $ 7,396,787 Construction in progress transferred to property and $ 19,393,132 $ 94,607,146 equipment Construction in progress transferred to intangible assets $ - $ 11,676,342 Advances to suppliers transferred to construction in $ - $ 7,652,350 progress Other assets transferred to construction in progress 2,754,075 3,070,647 Capitalized interest - amortization of discount of notes $ 6,107,601 $ 4,203,896 payable and issuance costs For more information, please contact: China Natural Gas, Inc. Chaoyang Qiao, CFO Phone: +86-29-8832-3325 x903 Cell: +86-137-0918-2877 Email: firstname.lastname@example.org Jackie Shi Investor Relations Director Phone: +86-29-8832-3325 x922 Cell: +86-139-9287-9998 Email: email@example.com SOURCE China Natural Gas, Inc. Website: http://www.naturalgaschina.com Website: http://us.lrd.yahoo.com/SIG=12bttf662/**http:/studio-5.financialcontent.com/prnews?Page=Quote&Ticker=CHNG
China Natural Gas Announces Year End 2012 Financial Results
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