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China Recycling Energy Corporation Reports 2013 First Quarter Financial Results



   China Recycling Energy Corporation Reports 2013 First Quarter Financial
                                   Results

PR Newswire

XI'AN, China, May 15, 2013

XI'AN, China, May 15, 2013 /PRNewswire-FirstCall/ -- China Recycling Energy
Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial
waste-to-energy solution provider in China, today announced its financial
results for the 2013 first quarter ended March 31, 2013.

Highlights

  o Total sales was $14.34 million, an increase of 14.19 million as compared
    to $0.14 million for the first quarter 2012
  o Net income was $3.30 million, up 63.1% from $2.02 million for the first
    quarter of 2012.
  o Total Operating Income grew by 46.8% to $7.26 million from $4.95 million
    for the first quarter of 2012 .
  o Fully diluted EPS of $0.07, as compared to $0.04 for the first quarter of
    2012.
  o Completion and Delivery of Shenqiu Phase II 12MW Biomass
    Power Generation Systems in Q1

Summary of Financial Results:

(In '000s of U.S. Dollars, except for  Three Months Ended March 31
per share data)
                                       2013                 2012
Total Sales (1) + (2)                  $14,341              $148
(1) System Sales                       14,080               -
(2) Contingent Rental Income           261                  148
Gross Profit                           3,440                133
Interest income on sales-type leases   3,825                4,814
Total Operating Income                 7,264                4,947
Net Income                             3,298                2,023
Comprehensive Net Income               3,624                2,145
Basic EPS                              0.07                 0.04
Diluted EPS                            0.07                 0.04
Adjusted Net Income in non-GAAP (1)    4,050                1,732
Adjusted EPS in Non-GAAP (1) (2)       0.08                 0.04
 

(1) CREG provides adjusted net income and earnings per share on a non-GAAP
basis that excludes non-cash, share-based compensation expense and non-cash
interest expense on the amortization of the beneficial conversion feature for
the convertible notes and non-cash deferred income tax expenses, as described
below, to enable investors to better assess the Company's operating
performance. The non-GAAP measures are described below and reconciled to the
corresponding GAAP measure in the section below titled "Non-GAAP Financial
Measures";

 

(2) Non-GAAP diluted weighted average shares outstanding were calculated based
on outstanding shares, issued options, and estimated shares under the
assumption that they would be converted from our convertible debentures.Mr.
Guohua Ku, Chairman and CEO of CREG commented, "We are very pleased with our
first quarter financial results of 2013. Our sales related revenue has
significant growth in the quarter as compared to the corresponding quarter
2012. A 14.1 million increase in system sales led to the rise in our revenue
and net income during this three month period."

 

Mr. Ku continued, "In terms of completed projects, we are excited to announce
that we further enlarged our project portfolio with the completion of Shenqiu
Project Phase II, a 12 MW biomass power generation project, by the end of the
first quarter of 2013. Currently, the total generation capacity of Shenqiu
power plant is increased to 24MW, and bringing our total operating capacity to
124 MW."

"As we complete existed projects, we are making great efforts to develop new
projects and business model. Besides the methods we currently applied for
waste power generation, we are focusing on developing coke dry quenching (CDQ)
waste heat power generation. With large-scale application of coke ovens, CDQ
is a trend in the future for the industry. By using CDQ technology, the energy
could be used more efficiently and pollution will be greatly reduced.
Therefore, CDQ waste power generation could reduce the costs for electricity
for enterprises and also help them to reduce environmental pollution. By doing
this, we could expand our market share and develop more projects.
Additionally, we are continuously seeking more cost-effective financing
options for our company and our customers in an effort to better grow our
business. We intend to expand our waste-to-energy power generating capacity
rapidly in order to meet the continuous demand growth for energy to gain
market share. We look forward to announcing the completion of projects under
development now and in the future and bringing more savings to our customers."

Financial Results for Three Months Ended March 31, 2013

Total sales, including system sales and contingent rental income, for the
three months ended March 31, 2013 was $14.34 million while the total sales for
the comparable period of 2012 was $0.15 million, an increase of $14.19 million
as a result of increases in system sales and in contingent rental income. Of
the total sales, sales of systems for the three months ended March 31, 2013
was $14.08 million, as compared to $0 for the comparable period of 2012, an
increase of $14.08 million. For the three months ended March 31, 2013, Shenqiu
Phase II project was completed and sold. In comparison, in the same period of
2012, none of the Company's power stations has been completed and sold. For
the three months ended March 31, 2013, the Company received contingent rental
income of $0.26 million from actual usage of the electricity in addition to
the minimum lease payments, compared to $0.15 million for the comparable
period in year 2012.For the sales-type lease, sales and cost of sales ("COS")
are recorded at the time of leases; interest income from the sales-type leases
is our other major revenue source in addition to sales revenue.

Cost of sales for the three months ended March 31, 2013 was $10.90 million
while our COS for the comparable period of 2012 was $14,383, an increase of
$10.89 million which was mainly due to the fact that Shenqiu Phase II power
generation was completed and sold during the three months ended March 31,
2013, while no project was sold during the comparable period of 2012.

Gross profit was $3.44 million for the three months ended March 31, 2013
compared to $0.13 million for the comparable period of 2012, a gross margin of
24% and 90% for the comparable period of 2013 and 2012, respectively.

Interest income on sales-type leases for the three months ended 2013 was $3.82
million, a $0.99 million decrease from $4.81 million for the comparable period
of 2012. During the first quarter of 2013, interest income was derived from 11
systems: one TRT systems, two CHPG systems, two systems with Erdos Phase I
project and three systems of Erdos Phase II project, the Pucheng biomass power
generation system, Shenqiu biomass power generation system and Zhongbao WHPG
system. The Company sold Shenqiu Phase II project on March 30, 2013, will
start to collect the payment from April 2013. In comparison, during the first
quarter of 2012, interest income was derived from 11 systems: one TRT systems,
two CHPG systems, two systems with Erdos Phase I project and three systems of
Erdos Phase II project, the Pucheng biomass power generation system, Shenqiu
biomass power generation system and Zhongbao WHPG system.

Our net income for the three months ended March 31, 2013 was $3.30 million
compared to $2.02 million for the comparable period of 2012, an increase of
$1.28 million. This increase in net income was mainly due to the increased
total sales compared with the comparable period of 2012.

For the first quarter of 2013, GAAP diluted EPS was $0.07 with approximately
50.22 million shares of common stock outstanding.  This compares with GAAP
diluted EPS of $0.04 in the first quarter of 2012 when the Company had 53.01
million shares of common stock outstanding.

Financial Position as of March 31, 2013

As of March 31, 2013, the Company had cash and cash equivalents of $44.85
million, other current assets were $13.98million and current liabilities were
$66.22 million.  Total shareholders' equity was $123.11 million, as compared
with $119.36million as of December 31, 2012.

The components of the net investment in sales-type leases as of March 31, 2013
and December 31, 2012 are as follows:

                                               March 31, 2013 March 31, 2012
Total future minimum lease payments receivable $399,987,266   $380,608,263
Less: executory cost                           (113,338,304)  (113,529,216)
Less: unearned interest income                 (145,980,151)  (138,668,584)
Net investment in sales - type leases          140,668,811    128,410,463
Current portion                                11,029,700     10,389,028
Noncurrent portion                             $129,639,111   $118,021,435

As of March 31, 2013, the future minimum rentals to be received on
non-cancelable sales-type leases by years are as follows: 

2014       38,539,638
2015       30,459,497
2016       29,326,592
2017       29,326,592
2018       29,326,592
Thereafter 243,008,355
Total      $399,987,266

Non-GAAP Financial Measures

For the 2013 first quarter, Non-GAAP net income was 3.3 million, as compared
with $1.6 million in the 2012 fourth quarter and $2.02 million in the 2012
first quarter.

The Company believes that "adjusted net income" and "adjusted earnings per
share" information, when taken in conjunction with reported results, provide a
useful measure of financial performance since they eliminate the impact of
certain non-recurring, non-cash charges. These non-GAAP measures should not be
considered in isolation or as a substitute for the most comparable GAAP
measures. Additionally, the non-GAAP financial measures used by CREG may not
be comparable to non-GAAP financial measures used by other companies.

(In '000s of U.S. Dollars, except for   3 Months Ended March 31
per share data)
Adjusted Net Income and EPS             2013                2012
Net Income                              3,298               2,023
Adjustments
Deferred Income Taxes                   751                 227
Interest expense related to beneficiary
conversion feature of convertible       -                   584
debentures
Stock based compensation expenses       -                   26
Interest income from changes in fair    -                   (1,127)
value of conversion liability
Gain on settlement of debt
Adjusted Net Income (1)                 4,050               1,732
Basic Weighted Average Shares           50,224,350          46,474,350
Outstanding (Shares)
Adjusted EPS in Non-GAAP (1)            0.08                0.04
 

 (1) CREG provides adjusted net income and earnings per share on a non-GAAP
basis that excludes non-cash, share-based compensation expense and non-cash
interest expense on the amortization of the beneficial conversion feature for
the convertible notes and non-cash deferred income tax expenses, as described
below, to enable investors to better assess the Company's operating
performance. The non-GAAP measures are described below and reconciled to the
corresponding GAAP measure in the section below titled "About Non-GAAP
Financial Measures."

10Q Filing

For more information regarding China Recycling Energy Corp.'s financial
performance during the quarter ended March 31, 2013, please refer to the
Quarterly Report on Form 10-Q, which was filed with the Securities and
Exchange Commission on May 15, 2013.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that
exclude the effect of non-cash, non-operating expenses related to the
Convertible Notes issued in April 2008, and the compensation expenses for the
fair value of stock options, as well as deferred income tax expenses. The
Company uses non-GAAP financial measures when it internally evaluates the
performance of its business and makes operating decisions, including internal
budgeting and performance measurement. The Company 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 CREG's
financial performance in comparison to historical periods, and it allows
investors to evaluate CREG's performance using the same methodology and
information as that used by the Company's 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.

About China Recycling Energy Corp.

China Recycling Energy Corp. (NASDAQ: CREG or "the Company") is based in
Xi'an, China and provides environmentally friendly waste-to-energy
technologies to recycle industrial byproducts for steel mills, cement
factories and coke plants in China. Byproducts include heat, steam, pressure,
and exhaust to generate large amounts of lower-cost electricity and reduce the
need for outside electrical sources. The Chinese government has adopted
policies to encourage the use of recycling technologies to optimize resource
allocation and reduce pollution. Currently, recycled energy represents only an
estimated 1 percent of total energy consumption and this renewable energy
resource is viewed as a growth market due to intensified environmental
concerns and rising energy costs as the Chinese economy continues to expand.
The management and engineering teams have over 20 years of experience in
industrial energy recovery in China. For more information about CREG, please
visit http://www.creg-cn.com.

Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating
to the business of China Recycling Energy Corp. and its subsidiary companies.
All statements, other than statements of historical fact included herein are
"forward-looking statements." These forward-looking statements are often
identified by the use of forward-looking terminology such as "believes,"
"expects" or similar expressions, involve known and unknown risks and
uncertainties. Although the Company believes that the expectations reflected
in these forward-looking statements are reasonable, they do involve
assumptions, risks and uncertainties, and these expectations may prove to be
incorrect. 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 at
http://www.sec.gov. All forward-looking statements attributable to the Company
or 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.

For more information, please contact:

     Mr. David Chong, Chief Financial Officer
     China Recycling Energy Corp.
     Tel:   +86-1370-1813139
     Email: chongscd@creg-cn.com 

SOURCE China Recycling Energy Corp.

Website: http://www.creg-cn.com
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