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Cleantech Solutions International Reports Fourth Quarter and Full Year 2012 Results



 Cleantech Solutions International Reports Fourth Quarter and Full Year 2012
                                   Results

PR Newswire

WUXI, Jiangsu Province, China, April 11, 2013

WUXI, Jiangsu Province, China, April 11, 2013 /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 months and year ended December 31, 2012.

"The year 2012 was marked by a challenging environment in China that impacted
capital spending and demand from customers in our key end markets,
particularly during the first half of the year.  Despite these challenges, we
closed the year with 28.3% growth in revenue in the fourth quarter, driven by
strong demand for our patented airflow dyeing machines and improving sales of
forged products to customers in the wind power industry.  Although we recorded
a non-cash impairment loss related to equipment which we are no longer using
and which is being held for sale during the fourth quarter, we were still
profitable due to greater operational efficiencies and careful cost control,"
said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions.

Fourth Quarter 2012 Results

Revenue for the fourth quarter of 2012 increased 28.3% to $17.6 million,
compared to $13.7 million for the same period of 2011. Revenue increased
slightly compared to the third quarter of 2012.

Revenue from the sale of forged rolled rings to the wind power industry and
other industries increased 2.6% to $8.3 million, or 47.2% of net revenue,
compared to $8.1 million, or 59.1% of net revenue, in the same period last
year. The increase in revenue was mainly due to improving demand from existing
customers in the wind power industry following several quarters of reduced
order flow, which was counterbalanced by lower market demand for capital
equipment related to the Company's forged rolled rings and related products
for other industries.

The increase in revenue is summarized as follows:

  o Revenue from the sale of forged rolled rings exclusively to the wind power
    industry increased by 15.5% to $5.6 million, representing 31.7% of net
    revenue, compared to $4.8 million, or 35.2% of net revenue, in the
    comparable period last year. 
  o Revenue from the sale of forged rolled rings to other industries decreased
    16.5% to $2.7 million, or 15.5% of net revenue, compared with $3.3
    million, or 23.9% of net revenue for the comparable period of the prior
    year. 

Revenue from the Company's dyeing and finishing equipment segment increased
65.5% to $9.3 million, or 52.8% of net revenues, compared to $5.6 million, or
40.9% of net revenue, for the fourth 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 fourth quarter of 2012 increased 38.2% to $4.2 million,
compared to $3.1 million for the same period in 2011. Gross margin increased
to 24.1% during the fourth quarter of 2012 compared to 22.4% for the same
period a year ago. The increase in gross margin for the fourth quarter was
primarily attributable to (i) the increased operational and cost efficiencies
for forged rolled rings and related products segment, including the allocation
of fixed costs primarily consisting of depreciation, to cost of revenues as
the Company operated at higher production levels in response to higher
revenues, and (ii) the significant portion of revenue for the dyeing and
finishing equipment segment generated from the sale of airflow dyeing
machinery, which generates a higher gross margin than the Company's
traditional dyeing machinery.  The principal source of dyeing revenue in the
fourth quarter of 2011 was traditional dyeing machinery.

Operating expenses increased 90.8% to $3.5 million, compared to $1.8 million
in the comparable period last year. The increase was primarily due to a
non-cash impairment loss of $2.2 million as a result of writing down the
carrying value of equipment to its estimated fair value based on an impairment
assessment conducted on the equipment held for sale at December 31, 2012. This
equipment had been used to manufacture certain electro-slag re-melted ("ESR")
equipment that was used to produce forged products for the high performance
components market.  Because the Company did not generate any revenue from
these products since 2011, the Company decided to try to sell the equipment,
which it classified at December 31, 2012 as equipment held for sale.  The
Company did not record any impairment loss in the fourth quarter of 2011.

Selling, general and administrative expenses for the three months ended
December 31, 2012 decreased 27.6% to $0.9 million, as compared to $1.2 million
for the three months ended December 31, 2011, primarily due to the decrease in
bad debt expense in the fourth quarter of 2012 as compared to the bad debt
expense for the fourth quarter of 2011.

Operating income decreased 40.8% to $0.7 million, compared to $1.2 million for
the same period of 2011. Operating margin was 4.1% compared to 8.9% in the
fourth quarter last year. Adjusted operating income, a non GAAP measurement,
which adds back to operating income the impairment loss, was $2.9 million, up
139.0% from the same quarter last year.  Adjusted operating margin was 16.7%
in the fourth quarter of 2012.

Other expense was $46,070, relatively unchanged compared to the same period in
2011.

Adjusted EBITDA, a non-GAAP measurement, which adds back to net income
interest expense, income tax, warrant modification expense, impairment loss,
depreciation and amortization, was up 60.4% to $4.8 million, compared to $3.0
million in the same quarter last year.

Net income for the fourth quarter of 2012 was $469,313, or $0.17 per diluted
share, compared to $0.8 million, or $0.31 per diluted share, in the fourth
quarter of 2011.  Adjusted net income, a non-GAAP measurement which does not
deduct impairment loss and warrant modification expense, was $2.7 million, or
$0.98 diluted earnings per share, up 238.5% from the same quarter of last
year.  Diluted earnings per share were calculated using diluted weighted
average shares of 2,742,040 and 2,553,213 for the three months ended December
31, 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 Full Year 2012

For the year ended December 31, 2012, revenues increased 2.9% to $57.2 million
from $55.6 million in 2011. Gross profit decreased 1.3% to $13.1 million,
compared to $13.3 million last year. Gross margin for the year ended December
31, 2012 was 23.0%, compared to 23.9% in 2011. Operating income decreased
22.5% to $6.3 million from $8.2 million in 2011. Adjusted operating income, a
non GAAP measurement which adds back the impairment loss, was $8.5 million, up
4.5% from 2011.  Adjusted EBITDA, a non GAAP measurement which adds back to
net income interest expense, income tax, warrant modification expense,
impairment loss, depreciation and amortization, was $15.3 million, compared to
$13.7 million last year.  Net income was $4.2 million, or $1.58 per diluted
share, a 27.1% decrease from $5.8 million, or $2.30 per diluted share, in
2011.  Adjusted net income, a non GAAP measurement which adds back impairment
loss and warrant modification expense, was $6.6 million, or $2.51 per diluted
share, in 2012.  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 December 31, 2012, Cleantech Solutions held cash and cash equivalents of
$1.4 million compared with $1.2 million at December 31, 2011.  Accounts
receivable were $10.1 million and total current assets of $19.1 million. The
Company had $2.2 million in short-term bank loans payable and stockholders'
equity was $78.0 million. In 2012, the Company generated $10.6 million in cash
flow from operations.

Recent Events

In the first quarter of 2013, the Company announced that it has received a
total of five purchase orders from new and existing customers to supply 147
units of dyeing machines, including 85 airflow dyeing machines using the
company's patented production technique, for an aggregate amount of $8.9
million. 

On January 4, 2013, the Company renewed its loan with Bank of China in the
amount of $949,953. The loan is due January 3, 2014 with interest at the
annual rate of 7.35% and secured by certain assets of the Company.

On January 29, 2013, the Company appointed RBSM LLP as its independent
registered public accounting firm, following Sherb & Co., LLP's, combining its
practice with RBSM LLP effective January 1, 2013.

Business Outlook

"Despite a challenging environment in 2012, we saw modest growth in our top
line as we diversified and expanded our product offering.  More importantly,
we achieved strong growth in profitability, on an adjusted basis, and
generated solid cash flow from operations to fund our capital expenditures and
product development initiatives. 

"Thus far in 2013, we have seen strong order flow in our dyeing machine
segment which we expect to continue throughout the year.  As a result, we have
added shifts, increased staff and placed orders for additional equipment to
expand capacity and meet anticipated demand. We saw a nice increase in demand
from wind power customers in the fourth quarter of 2012 and expect sales to
remain near these levels in the remainder of 2013.  We are also hopeful that
favorable Chinese government policy towards domestic solar companies will
influence demand by year end.    

"We continue to utilize our expertise in manufacturing precision products to
meet demand in new and existing end markets.  We recently shipped a prototype
of a new model of after-treatment textile equipment and have another model in
the late stages of development.  We are optimistic about sales of forged
products to non-wind customers and are currently seeking to expand into other
industries including oil and natural gas," Mr. Wu concluded.    

Conference Call

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Time
on Friday, April 12, 2013 to discuss financial results for the fourth quarter
and full year ended December 31, 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: 35398924.

If you are unable to participate in the conference call at this time, a replay
will be available for 14 days starting on April 12, 2013 at 10:00 am ET. To
access the replay, dial (855) 859-2056. International callers dial (404)
537-3406, and enter passcode: 35398924.

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, 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:
Mr. Adam Wasserman                                  Elaine Ketchmere, CFA
Chief Financial Officer                             CCG Investor Relations
Cleantech Solutions International, Inc.             Tel: +1 310 954-1345
Email: adamw@cleantechsolutionsinternational.com    Email:
                                                    Elaine.Ketchmere@ccgir.com
Web: www.cleantechsolutionsinternational.com        Web: www.ccgirasia.com

- Financial Tables Follow-

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                     For the Three Months      For the Years Ended
                                                     Ended
                                                     December 31,              December 31,
                                                     2012         2011         2012         2011
                                                     Unaudited    Unaudited    Audited      Audited
REVENUES                                             $17,613,406  $13,728,005  $57,199,221  $55,579,262
COST OF REVENUES                                     13,373,200   10,658,894   44,062,636   42,275,919
GROSS PROFIT                                         4,240,206    3,069,111    13,136,585   13,303,343
OPERATING EXPENSES:
     Depreciation                                    413,283      607,443      1,535,715    1,112,769
     Impairment loss                                 2,206,253    -            2,206,253    -
     Selling, general and administrative             893,858      1,234,303    3,050,911    4,007,997
        Total Operating Expenses                     3,513,394    1,841,746    6,792,879    5,120,766
INCOME FROM OPERATIONS                               726,812      1,227,365    6,343,706    8,182,577
OTHER INCOME (EXPENSE):
     Interest income                                 465          2,712        11,384       3,652
     Interest expense                                (60,974)     (70,729)     (305,659)    (193,709)
     Foreign currency gain                           (6,485)      9,863        157          5,046
     Warrant modification expense                    -            -            (235,133)    -
     Other income                                    20,924       12,069       85,727       103,448
        Total Other Income (Expense)                 (46,070)     (46,085)     (443,524)    (81,563)
INCOME BEFORE INCOME TAXES                           680,742      1,181,280    5,900,182    8,101,014
INCOME TAXES                                         211,429      390,846      1,701,602    2,340,471
NET INCOME                                           $469,313     $790,434     $4,198,580   $5,760,543
COMPREHENSIVE INCOME:
       NET INCOME                                    $469,313     $790,434     $4,198,580   $5,760,543
OTHER COMPREHENSIVE INCOME:
       Unrealized foreign currency translation gain  201,400      403,282      543,415      2,549,278
       COMPREHENSIVE INCOME                          $670,713     $1,193,716   $4,741,995   $8,309,821
NET INCOME PER COMMON SHARE:
    Basic                                            $0.17        $0.39        $1.65        $2.94
    Diluted                                          $0.17        $0.31        $1.58        $2.30
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
    Basic                                            2,742,040    2,036,680    2,538,246    1,962,146
    Diluted                                          2,742,040    2,553,213    2,649,043    2,500,805

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED BALANCE SHEETS
                                                      December 31,
                                                      2012         2011
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                         $1,445,728   $1,152,607
    Restricted cash                                   -            314,233
    Notes receivable                                  88,029       53,420
    Accounts receivable, net of allowance for         10,078,623   7,087,958
doubtful accounts
    Inventories, net of reserve for obsolete          5,897,555    4,276,090
inventory
    Advances to suppliers                             593,104      219,347
    Prepaid VAT on purchases                          542,032      1,512,213
    Prepaid expenses and other                        428,326      110,670
        Total Current Assets                          19,073,397   14,726,538
PROPERTY AND EQUIPMENT - net                          59,436,100   64,042,079
OTHER ASSETS:
   Deferred tax assets                                551,890      -
   Equipment held for sale                            7,118,555    -
   Land use rights, net                               3,756,342    3,820,536
        Total Assets                                  $89,936,284  $82,589,153
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Short-term bank loans                             $2,216,558   $2,356,749
    Bank acceptance notes payable                     -            314,233
    Accounts payable                                  5,474,479    4,997,109
    Accrued expenses                                  986,824      771,597
    Capital lease obligation - current portion        251,413      244,747
    Advances from customers                           1,851,987    1,166,942
    VAT and service taxes payable                     206,527      -
    Income taxes payable                              822,082      592,202
        Total Current Liabilities                     11,809,870   10,443,579
OTHER LIABILITIES:
    Capital lease obligation - net of current portion 132,756      381,235
         Total Liabilities                            11,942,626   10,824,814
STOCKHOLDERS' EQUITY:
    Preferred stock ($0.001 par value; 10,000,000
shares authorized and 0 share
       issued and outstanding at December 31, 2012;
30,000,000 shares authorized
       and designated  as series A convertible
preferred stock and
       10,995,807 shares issued and outstanding at    -            10,996
December 31, 2011)
    Common stock ($0.001 par value; 50,000,000 shares
authorized;
       2,894,586 and 2,101,849 shares issued and
outstanding
       at December 31, 2012 and 2011, respectively)   2,894        2,102
    Additional paid-in capital                        28,987,128   27,489,600
    Retained earnings                                 38,401,734   34,618,341
    Statutory reserve                                 2,479,738    2,064,551
    Accumulated other comprehensive gain - foreign    8,122,164    7,578,749
currency translation adjustment
        Total Stockholders' Equity                    77,993,658   71,764,339
        Total Liabilities and Stockholders' Equity    $89,936,284  $82,589,153

 

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               For the Years Ended
                                               December 31,
                                               2012               2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                    $4,198,580         $5,760,543
 Adjustments to reconcile net income from
 operations to net cash
    provided by operating activities:
    Depreciation                               6,519,394          5,351,359
    Amortization of land use rights            93,537             91,316
    Decrease in inventory reserve              (37,882)           -
    (Decrease) increase in allowance for       (46,672)           720,302
    doubtful accounts
    Loss on impairment of equipment held for   2,206,253          -
    sale
    Warrant modification expense               235,133            -
    Stock-based compensation expense           167,714            355,856
 Changes in operating assets and liabilities:
    Notes receivable                           (34,178)           (848)
    Accounts receivable                        (2,887,716)        694,014
    Inventories                                (1,549,740)        (761,072)
    Prepaid value-added taxes on purchases     981,236            1,331,923
    Prepaid and other current assets           (43,513)           (64,667)
    Advances to suppliers                      (371,849)          125,396
    Accounts payable                           438,945            (3,425,206)
    Accrued expenses                           209,831            224,493
    VAT and service taxes payable              206,405            (83,358)
    Income taxes payable                       (326,373)          (777,914)
    Advances from customers                    675,667            906,282
NET CASH PROVIDED BY OPERATING ACTIVITIES      10,634,772         10,448,419
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment         (10,744,247)       (11,115,640)
NET CASH USED IN INVESTING ACTIVITIES          (10,744,247)       (11,115,640)
CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on capital lease        (246,485)          (156,918)
    Proceeds from bank loans                   3,481,101          4,325,320
    Repayments of bank loans                   (3,639,333)        (3,861,893)
    Decrease (increase) in restricted cash     316,464            (308,951)
    (Decrease) increase in bank acceptance     (316,464)          308,951
    notes payable
    Proceeds from sale of common stock         -                  125,000
    Proceeds from sale of common stock -       612,903            -
    related parties
    Proceeds from exercise of warrants         198,142            400,000
NET CASH PROVIDED BY FINANCING ACTIVITIES      406,328            831,509
EFFECT OF EXCHANGE RATE ON CASH AND CASH       (3,732)            41,142
EQUIVALENTS
NET INCREASE IN CASH AND CASH EQUIVALENTS      293,121            205,430
CASH AND CASH EQUIVALENTS - beginning of year  1,152,607          947,177
CASH AND CASH EQUIVALENTS - end of year        $1,445,728         $1,152,607
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
 Cash paid for:
                  Interest                     $305,659           $193,709
                  Income taxes                 $2,027,976         $3,118,384
NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Security deposit and leased property in       $               -  $772,379
 exchange for capital lease obligations
 Increase in property in exchange for          $               -  $516,531
 increase in payable
 Series A preferred converted to common        $13,198            $5,916
 shares
 Common stock issued for future service        $281,265           $7,833

 

Reconciliation of Net Income to Adjusted EBITDA
(Amounts expressed in US$)
                          For the Three Months Ended   For the Years Ended
                          December 31,                 December 31,
                          2012            2011         2012         2011
Net income              $ 469,313     $   790,434    $ 4,198,580  $ 5,760,543
Add: income tax           211,429         390,846      1,701,602    2,340,471
Add: interest expense     60,974          70,729       305,659      193,709
Add: warrant modification -               -            235,133      -
expense
Add:  impairment loss     2,206,253       -            2,206,253    -
Add: depreciation and     1,823,094       1,723,362    6,612,931    5,442,675
amortization
Adjusted EBITDA         $ 4,771,063   $   2,975,371  $ 15,260,158 $ 13,737,398
 

 

Reconciliation of Adjusted Operating Income, Net Income and EPS
(Amounts expressed in US$)
                          For the Three Months Ended   For the Years Ended
                          December 31,                 December 31,
                          2012            2011         2012         2011
Income from operations  $ 726,812     $   1,227,365  $ 6,343,706  $ 8,182,577
Add:  impairment loss     2,206,253       -            2,206,253    -
Adjusted income from    $ 2,933,065   $   1,227,365  $ 8,549,959  $ 8,182,577
operations
Net income              $ 469,313     $   790,434    $ 4,198,580  $ 5,760,543
Add:  impairment loss     2,206,253       -            2,206,253    -
Add:  warrant             -               -            235,133      -
modification expense
Adjusted net income     $ 2,675,566   $   790,434    $ 6,639,966  $ 5,760,543
Weighted average shares   2,742,040       2,553,213    2,649,043    2,500,805
- diluted
Adjusted diluted EPS    $ 0.98        $   0.31       $ 2.51       $ 2.30

 

  

SOURCE Cleantech Solutions International, Inc.

Website: http://www.cleantechsolutionsinternational.com
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