China Natural Gas Announces Second Quarter 2013 Financial Results PR Newswire XI'AN, China, Aug. 14, 2013 XI'AN, China, Aug. 14, 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 second quarter ended June 30, 2013. Second Quarter 2013 Results Revenue in the second quarter of 2013 decreased by 9.6% to $34.2 million from $37.9 million in the second quarter of 2012, driven by the closure of three fueling stations in the second quarter of 2012, three fueling stations in the third quarter of 2012, one fueling station in October 2012, and one fueling station in April 2013 because of changes in market conditions. Sales revenue of natural gas decreased by 9.1% year-over-year to $31.8 million from $34.9 million in the second quarter of 2012. Gasoline revenue in the second quarter of 2013 decreased by 28.2% to $0.5 million, from $0.7 million in the same period of the prior year, mainly because the closure of one gasoline fueling stations during the fourth quarter of 2012. Installation and automobile conversion services revenue decreased by 12.9% year-over-year to $2.0 million, from $2.3 million a year ago. In the second quarter of 2013, sales of natural gas, gasoline, and installation and automobile conversion services contributed 92.7%, 1.5%, and 5.8% of total revenue, respectively. Gross profit in the second quarter of 2013 decreased 18.7% to $11.2 million from $13.8 million in the same period of the prior year. Gross margin in the second quarter of 2013 was 32.8%, compared to 36.5% a year ago. Gross margin decreased primarily due to the decrease in gross margin for our LNG business. Operating income in the second quarter of 2013 was $4.0 million, a decrease of 38.6% year-over-year from $6.6 million, primarily attributable to the decrease in gross profit of natural gas from fueling stations and LNG. Income tax expense was $0.7 million at an effective tax rate of 18.2%, as compared to $1.3 million at an effective tax rate of 19.8% in the second quarter of 2012. The decrease of effective income tax rate was primarily attributable to the reduced income tax rate of 15% enjoyed by JBLNG beginning on January 1, 2013. Net income in the second quarter of 2013 decreased by 37.4% to $3.2 million or $0.15 per diluted share from $5.1 million or $0.24 per diluted share in the second quarter of 2012. As of June 30, 2013, the Company had $7.4 million of cash and cash equivalents on hand, compared to $10.9 million of cash and cash equivalents as of December 31, 2012. The decrease was primarily attributable to the construction of pipelines in Shaanxi Province and LNG fueling stations in Hubei Province, and the repayment of the loans from Shanghai Pudong Development Bank. Net cash provided by operating activities was $10.0 million for the six months ended June 30, 2013, as compared to net cash provided by operations of $18.8 million for the six months ended June 30, 2012. The decrease was primarily due to the increase in advances to suppliers, accounts receivable and other receivable, and adjustments for non-cash expense items. Conference Call Management will hold a conference call on Friday, August 16, 2013 at 9:00 a.m. EDT (6:30 a.m. Pacific) to discuss its second quarter results. To participate in the call please dial 1-800-860-2442, or 1 412-858-4600 for international calls, approximately 10 minutes prior to the scheduled start time. A replay of the call will be available 1 hour after the end of the conference through End Date on Aug 26, 2013 at 9:00 am EDT. The number for the replay is 1-877-344-7529 or 1-412-317-0088 for international calls；the pass code for the replay is 10032849. 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. As of June 30, 2013, the Company owns approximately 120 km of high-pressure pipelines and operates 19 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，and sales of LNG through our mobile fueling truck; (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. 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. 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 tofourth 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 JUNE30, 2013 AND DECEMBER 31, 2012 (Stated in US Dollars) June 30, (Audited) 2013 December31, 2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,385,901 $ 10,857,456 Accounts receivable, net 2,580,664 2,148,379 Other receivables, net 1,005,614 458,605 Employee advances 353,408 399,031 Inventories 2,916,691 2,473,933 Advances to suppliers 9,259,807 4,869,606 Prepaid expense and other current assets 3,009,853 3,541,431 Total current assets 26,511,938 24,748,441 Investment in unconsolidated joint ventures - 1,587,000 Property and equipment, net 181,454,681 179,515,563 Construction in progress 61,900,042 53,393,933 Goodwill 857,269 839,806 Other intangible assets 21,233,562 21,400,924 Prepaid expenses and other assets 7,538,785 7,015,142 TOTAL ASSETS $ 299,496,277 $ 288,500,809 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Senior notes- current maturities $ 39,149,998 $ 38,352,498 Current portion of bank loan payable 4,860,000 4,761,000 Redeemable liabilities - warrants 17,500,000 17,500,000 Accounts payable and accrued liabilities 6,554,897 6,756,278 Other payable - related party 840,041 1,616,429 Short-term borrowing - related party 2,679,945 2,679,945 Unearned revenue 3,283,380 3,663,570 Accrued interest 2,854,030 1,936,584 Taxes payable 1,507,698 2,232,546 Total current liabilities 79,229,989 79,498,850 LONG-TERM LIABILITIES: Bank loan payable, net of current portion 3,240,000 4,761,000 Total liabilities $ 82,469,989 $ 84,259,850 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 2,145 2,145 outstanding at June30, 2013 and December 31, 2012, respectively Additional paid-in capital 83,649,675 83,501,637 Accumulated other comprehensive income 26,073,493 21,276,931 Statutory reserves 12,737,218 11,818,087 Retained earnings 94,272,625 87,410,615 Noncontrolling interests 291,132 231,544 Total stockholders' equity 217,026,288 204,240,959 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 299,496,277 $ 288,500,809 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE30, 2013 AND 2012 (Stated in US Dollars) Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Revenues Natural gas $ 31,765,252 $ 34,927,804 $ 63,945,320 $ 64,327,491 Gasoline 503,680 701,168 978,679 1,527,063 Installation and 1,979,026 2,272,723 4,823,289 4,324,459 others 34,247,958 37,901,695 69,747,288 70,179,013 Cost of revenues Natural gas 21,696,966 22,462,516 42,650,396 41,737,375 Gasoline 453,364 655,614 874,025 1,443,758 Installation and 849,457 955,283 2,046,105 1,807,528 others 22,999,787 24,073,413 45,570,526 44,988,661 Gross profit 11,248,171 13,828,282 24,176,762 25,190,352 Operating expenses Selling 6,034,037 5,619,864 11,587,891 10,570,664 General and 1,177,469 1,636,029 2,709,459 4,347,675 administrative 7,211,506 7,255,893 14,297,350 14,918,339 Income from 4,036,665 6,572,389 9,879,412 10,272,013 operations Other income (expense): Interest 10,973 9,853 20,696 20,599 income Interest (171,992) (275,643) (361,371) (707,680) expense Loss on disposal of fixed (358) - (57,403) - assets Loss on sales of long term (500) - (80,150) - investment Other income 9,543 18,763 35,742 (14,330) (expense), net Change in fair - (1,146) - (1,229) value of warrants Foreign currency exchange (4,456) 1,494 (5,269) (504,446) loss (156,790) (246,679) (447,755) (1,207,086) Income before 3,879,875 6,325,710 9,431,657 9,064,927 income tax Provision for 705,467 1,251,128 1,590,928 2,042,599 income tax Net income 3,174,408 5,074,582 7,840,729 7,022,328 Less: Income (loss) attributable to 32,735 28,876 59,588 (199,183) noncontrolling interests Net income attributable to 3,141,673 5,045,706 7,781,141 7,221,511 China Natural Gas, Inc. Other comprehensive income Foreign currency 3,494,137 (17,584) 4,796,562 1,741,216 translation gain Comprehensive $ 6,635,810 $ 5,028,122 $ 12,577,703 $ 8,962,727 income Weighted average shares outstanding Basic 21,458,654 21,458,654 21,458,654 21,458,654 Diluted 21,458,654 21,458,654 21,458,654 21,458,654 Earnings per share Basic $ 0.15 $ 0.24 $ 0.36 $ 0.34 Diluted $ 0.15 $ 0.24 $ 0.36 $ 0.34 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIXMONTHS ENDED JUNE30, 2013 AND 2012 (Stated in US Dollars) 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 7,840,729 7,022,328 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,938,760 6,945,862 Provision for (recovery of)doubtful 110,063 202,100 accounts Loss (Gain) on disposal of equipment 57,403 - Loss (Gain) on sales of long term 80,150 - investment Stock-based compensation 148,038 296,076 Change in fair value of warrants - 1,229 Change in assets and liabilities: Accounts receivable (493,607) 1,035,676 Other receivables (963,970) (146,652) Employee advances 53,069 (137,270) Inventories (387,209) (591,244) Advances to suppliers (4,243,935) (336,767) Prepaid expense and other current assets 655,917 3,527,412 Accounts payable and accrued liabilities 494,285 1,830,593 Unearned revenue (451,580) (311,342) Accrued interest 917,446 (25,477) Taxes payable (763,178) (462,934) Net cash provided by operating activities 9,992,381 18,849,590 CASH FLOWS FROM INVESTING ACTIVITIES: Payment for acquisition of property and (1,411,550) (3,592,657) equipment Proceeds from sales of property and 7,178 - equipment Proceeds from sales of long term investment 721,350 - Additions to construction in progress (10,367,064) (10,459,937) Prepayment on long-term assets (170,460) 52,892 Payment for acquisition of business - (657,007) Payment for intangible assets - (1,511,611) Net cash used in investing activities (11,220,546) (16,168,320) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of short-term borrowing and other (801,500) - payable, related parties Repayment of long-term debt (1,603,000) (793,500) Repayment of senior notes - (3,333,334) Increase in restricted cash - (1,890,641) Net cash (used in) provided by financing (2,404,500) (6,017,475) activities Effect of exchange rate changes on cash and 161,110 17,388 cash equivalents NET (DECREASE) INCREASE IN CASH AND CASH (3,471,555) (3,318,817) EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF 10,857,456 9,622,883 PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,385,901 $ 6,304,066 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net of capitalized interest $ 284,978 $ 481,583 Income taxes paid $ 2,001,258 $ 1,967,965 Non-cash transactions for investing and financing activities: Construction materials transferred to $ - $ 67,142 Construction in progress Construction in progress transferred to $ 3,143,182 $ 18,507,550 property and equipment Capitalized interest - amortization of $ - $ 2,040,389 discount of notes payable and issuance cost Other assets transferred to construction in $ 94,345 $ 2,395,267 progress For more information, please contact: China Natural Gas, Inc. Zhaoyang Qiao, CFO Phone: +86-29-8832-7391 Email: email@example.com Jackie Shi Investor Relations Director Phone: +86-29-8832-3325 x922 Cell: +86-139-9287-9998 Email: firstname.lastname@example.org SOURCE China Natural Gas, Inc. Website: http://www.naturalgaschina.com
China Natural Gas Announces Second Quarter 2013 Financial Results
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