Cleantech Solutions International Reports Second Quarter 2013 Results

    Cleantech Solutions International Reports Second Quarter 2013 Results

PR Newswire

WUXI, China, Aug. 14, 2013

WUXI, China, Aug. 14, 2013 /PRNewswire-FirstCall/ --Cleantech Solutions
International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a
manufacturer of metal components and assemblies, primarily used in various
clean technology and manufacturing industries, today announced its financial
results for the three and six months ended June 30, 2013.

"During the second quarter, we continued on our growth trajectory with solid
year-over-year increases in revenue and net income. Our dyeing machine
segment was the main driver behind our performance, as textile manufacturers
continue to phase out obsolete equipment and reduce pollution from the dyeing
process in keeping with the policies of local PRC governments," said Mr.
Jianhua Wu, Chairman and CEO of Cleantech Solutions. "We also saw a healthy
increase in sales of forged products to customers outside the wind power
industry. "

Second Quarter 2013 Results

Revenue for the second quarter of 2013 increased 34.1% to $17.2 million,
compared to $12.8 million for the same period of 2012.

Revenue growth was primarily driven by sales of dyeing and finishing equipment
due to demand for the Company's low-emission airflow dyeing machines, which
meet the policies of local PRC governments to phase out obsolete equipment and
reduce pollution from the dyeing process. In addition, demand for forged
rolled rings and related products for industries other than the wind power
industry rose considerably due to increasing market demand for capital
equipment, which was offset by a decline in demand for forged products from
customers in the wind power industry.

The increase in revenue is summarized as follows:

  oRevenue from the dyeing and finishing equipment segment increased 95.0% to
    $9.0 million, compared to $4.6 million for the second quarter of 2012.
  oRevenue from the sale of forged rolled rings to other industries increased
    43.1% to $5.1 million, compared with $3.6 million for the comparable
    period of the prior year.
  oRevenue from the sale of forged rolled rings for the wind power industry
    declined 33.4% to $3.1 million, compared to $4.6 million for the
    comparable period last year.

Gross profit for the second quarter of 2013 increased 47.5% to $4.0 million,
compared to $2.7 million for the same period in 2012. Gross margin increased
to 23.1% during the second quarter of 2013 compared to 21.0% for the same
period a year ago. The increase in gross margin for the second 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
second quarter of 2012 was traditional dyeing machinery.

Operating expenses decreased 23.2% to $0.9 million, compared to $1.1 million
in the comparable period last year. The decrease was primarily due to a
recovery of bad debt and lower depreciation expenses resulting from the
classification of certain equipment as held for sale in the fourth quarter of
2012, on which depreciation was taken in the second quarter of 2012 but not in
the second quarter of 2013.

Selling, general and administrative expenses for the three months ended June
30, 2013 declined 17.5% to $0.6 million, primarily due to a $0.3 million
recovery of bad debt, offset by higher travel and entertainment and shipping
costs associated with the increase in sales and an increase in research and
development expense related to the Company's new after treatment equipment.

Operating income increased 98.1% to $3.1 million, compared to $1.6 million for
the same period of 2012. Operating margin was 18.1% compared to 12.2% in the
second quarter last year.

Adjusted EBITDA, a non-GAAP measurement, which adds back to net income
interest expense, income tax, warrant modification expense, depreciation and
amortization, rose 52.2% to $4.8 million, compared to $3.1 million in the same
quarter last year. The calculation of adjusted EBITDA is shown in a table
following the financial tables.

Net income for the second quarter of 2013 was $2.3 million, or $0.79 per
diluted share, compared to $1.1 million, or $0.40 per diluted share, in the
second quarter of 2012. Diluted earnings per share were calculated using
diluted weighted average shares of 2,955,786 and 2,660,983 for the three
months ended June 30, 2013 and 2012, respectively. All share and per share
information has been adjusted to reflect a one-for-ten reverse stock split
effective March 6, 2012.

Six Month Results

For the six months ended June 30, 2013, revenue increased 39.8% to$31.1
millionfrom$22.2 millionin the first half of 2012. Gross profit increased
55.2% to$7.1 million, compared to$4.6 millionlast year. Gross margin for
first half of 2013 was 22.8%, compared to 20.6% in the first half of 2012.
Operating income increased 123.7% to$5.4 millionfrom$2.4 millionin the
first half of 2012. Adjusted EBITDA, a non-GAAP measurement which adds back to
net income interest expense, income tax, warrant modification expense,
depreciation and amortization, was$8.7 million, compared to$5.6 millionin
the first half of 2012. Net income was$4.0 million, or$1.35per diluted
share, up from $1.4 million, or$0.53per diluted share, in the first half of
2012. All share and per share information have been adjusted to reflect a
one-for-ten reverse stock split effectiveMarch 6, 2012.

Financial Condition

As of June 30, 2013, Cleantech Solutions held cash and cash equivalents of
$3.3 million compared with $1.4 million at December 31, 2012. Accounts
receivable were $10.0 million and total current assets of $22.7 million as of
June 30, 2013. The Company had $3.1 million in short-term bank loans payable
at June 30, 2013, up from $2.2 million at December 31, 2012. Stockholders'
equity was $85.4 million at June 30, 2013.

In the first half of 2013, the Company generated $5.2 million in cash flow
from operations. The increase in short term loans, combined with cash flow
from operations, was used to purchase approximately $5.8 million of equipment
to expand capacity of airflow dyeing machines.

On June 18, 2013, the Company entered into agreements dated June 17, 2013
pursuant to which it sold a total of 428,398 shares of common stock at a
purchase price of $4.50 per share. On July 10, 2013, the Company sold a total
of 150,518 shares of common stock at a price of $4.70 per share to an
investor. The Company received net proceeds from the sale of these shares of
approximately $2,389,000. The Company will use the proceeds for working
capital and other general corporate purposes.

In July and August 2013, the Company repaid approximately $1.0 million in bank
acceptance notes payable which were collateralized by 100% of restricted cash
deposited.

Recent Events

On June 20, 2013, the Company announced it received purchase orders
totalingRMB 12.2 million(approximately$2.0 million) for 21 airflow-dyeing
machines from a new domestic customer. The Company expects to begin shipping
the machines in September 2013.

On June 5, 2013, the Company's variable interest entity, Wuxi Huayang Dyeing
Machinery Co., Ltd. (Wuxi Huayang), received five new patent certificatesfrom
the State Intellectual Property Office of the People's Republic of China for
devices and parts of its airflow dyeing machine. The patents relate to devices
and parts that allow for lower water and energy usage, improved dyeing
effects, extend the service life of the machine and provide easier cleaning of
atomized dyeing equipment.The patents provide the Company with exclusive use
of these designs in dyeing equipment for a period of ten years in China.

Business Outlook

Based on current and anticipated orders, for the full year endingDecember 31,
2013the Company affirms its guidance for revenue in the range of$60 - $62
millionand net income in the range of$8.0 - $8.5 million.

"As we enter the second half of the year, we are confident about our future
although we have some concerns regarding credit conditions in China. We
expect sales of airflow dyeing machines and anticipated sales of new products,
including our after treatment compacting machine, to be the main drivers of
revenue growth. We have purchased new equipment that will increase dyeing
machine capacity by year end and are hopeful that we will secure customers for
our new forged products and after treatment textile equipment soon."

"We anticipate a lesser contribution from wind and solar customers given the
near-term challenges facing these markets. We will continue to utilize our
assets, along with our expertise in manufacturing precision products, to meet
the needs of other heavy equipment and clean technology industries as we seek
profitable growth," Mr. Wu concluded. 

Conference Call

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Time
on Thursday, August 15, 2013 to discuss financial results for the second
quarter ended June 30, 2013.

To participate in the live conference call, please dial the following number
five to ten minutes prior to the scheduled conference call time: (800)
860-2442. International callers should dial (412) 858-4600.

If you are unable to participate in the conference call at this time, a replay
will be available starting an hour after the conference call through 10:00
A.M. ET August 23, 2013. To access the replay, dial (877) 344-7529.
International callers dial (412) 317-0088, and enter conference number:
10032787.

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 and manufacturing 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
and in the conference call referred to in this press release 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 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
our Form 10-Q for the quarter ended June 30, 2013. 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 Contacts:
Cleantech Solutions International, Inc.
Adam Wasserman, CFO
E-mail: adamw@cleantechsolutionsinternational.com
Web: www.cleantechsolutionsinternational.com

Compass Investor Relations
Elaine Ketchmere, CFA
Email: eketchmere@compass-ir.com 
Web: www.compassinvestorrelations.com

- Financial Tables Follow-

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                         For the Three Months Ended  For the Six Months Ended
                         June 30,                    June 30,
                         2013           2012          2013         2012
REVENUES                 $17,214,134    $12,832,863   $31,098,833  $22,242,092
COST OF REVENUES         13,241,114     10,138,628    23,995,723   17,665,171
GROSS PROFIT             3,973,020      2,694,235     7,103,110    4,576,921
OPERATING EXPENSES:
 Depreciation        244,673        373,924       351,887      748,536
 Selling, general    620,151        751,544       1,358,151    1,417,667
and administrative
 Total Operating  864,824        1,125,468     1,710,038    2,166,203
Expenses
INCOME FROM OPERATIONS   3,108,196      1,568,767     5,393,072    2,410,718
OTHER INCOME (EXPENSE):
 Interest income     688            346           1,169        5,850
 Interest expense    (64,526)       (70,363)      (169,653)    (160,396)
 Foreign currency    (5,979)        1,115         (5,979)      5,391
(loss) gain
 Warrant             0              0             0            (235,133)
modification expense
 Other income        8,152          6,635         37,082       13,280
 Total Other      (61,665)       (62,267)      (137,381)    (371,008)
Income (Expense), net
INCOME BEFORE INCOME     3,046,531      1,506,500     5,255,691    2,039,710
TAXES
INCOME TAXES             723,978        435,130       1,310,538    665,545
NET INCOME               $2,322,553     $1,071,370    $3,945,153   $1,374,165
COMPREHENSIVE INCOME:
 NET INCOME         $2,322,553     $1,071,370    $3,945,153   $1,374,165
OTHER COMPREHENSIVE
INCOME:
Unrealized foreign
currency translation     1,217,027      59,938        1,645,467    511,640

gain
 COMPREHENSIVE      $3,539,580     $1,131,308    $5,590,620   $1,885,805
INCOME
NET INCOME PER COMMON
SHARE:
 Basic                $0.79          $0.42         $1.35        $0.58
 Diluted              $0.79          $0.40         $1.35        $0.53
WEIGHTED AVERAGE COMMON

SHARES OUTSTANDING:
 Basic                2,955,786      2,572,753     2,925,355    2,370,138
 Diluted              2,955,786      2,660,983     2,925,355    2,592,864



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                                         June 30,     December31,
                                                         2013         2012
                                                         (Unaudited)
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                            $3,254,981   $1,445,728
 Restricted cash                                      1,325,103    -
 Notes receivable                                     356,984      88,029
 Accounts receivable, net of allowance for doubtful   10,041,350   10,078,623
accounts
 Inventories, net of reserve for obsolete inventory   5,496,255    5,897,555
 Advances to suppliers                                1,083,719    593,104
 Prepaid VAT on purchases                             747,937      542,032
 Prepaid expenses and other                           358,778      428,326
 Total Current Assets                             22,665,107   19,073,397
PROPERTY AND EQUIPMENT - net                             64,141,009   59,436,100
OTHER ASSETS:
 Deferred tax assets                                   563,296      551,890
 Equipment held for sale                               7,265,684    7,118,555
 Land use rights, net                                  3,786,215    3,756,342
 Total Assets                                     $98,421,311  $89,936,284
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Short-term bank loans                                $3,070,360   $2,216,558
 Bank acceptance notes payable                        1,325,103    -
 Accounts payable                                     4,678,568    5,474,479
 Accrued expenses                                     590,757      986,824
 Capital lease obligation - current portion           260,215      251,413
 Advances from customers                              2,193,374    1,851,987
 VAT and service taxes payable                        176,232      206,527
 Income taxes payable                                 774,878      822,082
 Total Current Liabilities                        13,069,487   11,809,870
OTHER LIABILITIES:
 Capital lease obligation - net of current portion    -            132,756
 Total Liabilities                               13,069,487   11,942,626
STOCKHOLDERS' EQUITY:
Preferred stock ($0.001 par value; 10,000,000 shares

 authorized; 0 share issued and outstanding at June    -            -
30,

 2013 and December 31, 2012, respectively)
Common stock ($0.001 par value; 50,000,000 shares

authorized;3,322,984and2,894,586sharesissuedand
                                                         3,323        2,894
outstanding at June 30, 2013 and December 31, 2012,

respectively)
 Additional paid-in capital                             30,754,245   28,987,128
 Retained earnings                                      42,186,956   38,401,734
 Statutory reserve                                      2,639,669    2,479,738
 Accumulated other comprehensive gain - foreign
                                                         9,767,631    8,122,164
 currency translation adjustment
 Total Stockholders' Equity                       85,351,824   77,993,658
 Total Liabilities and Stockholders' Equity       $98,421,311  $89,936,284



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      For the Six Months Ended
                                                      June 30,
                                                      2013         2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                           $3,945,153   $1,374,165
 Adjustments to reconcile net income from operations
 to

 net cash
    provided by operating activities:
    Depreciation                                      3,221,159    3,092,511
    Amortization of land use rights                   47,307       46,727
    Decrease in allowance for doubtful accounts       (312,411)    (46,631)
    Warrant modification expense                      -            235,133
    Stock-based compensation expense                  132,956      101,590
 Changes in operating assets and liabilities:
    Notes receivable                                  (264,582)    6,324
    Accounts receivable                               555,644      (825,725)
    Inventories                                       518,191      (1,603,500)
    Prepaid value-added taxes on purchases            (192,840)    913,184
    Prepaid and other current assets                  (60,237)     (32,988)
    Advances to suppliers                             (473,782)    (1,379,275)
    Accounts payable                                  (1,740,644)  (188,919)
    Accrued expenses                                  (409,484)    171,338
    VAT and service taxes payable                     (34,233)     54,685
    Income taxes payable                              (63,582)     (112,101)
    Advances from customers                           300,212      1,217,798
NET CASH PROVIDED BY OPERATING ACTIVITIES             5,168,827    3,024,316
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                (5,824,104)  (3,263,008)
NET CASH USED IN INVESTING ACTIVITIES                 (5,824,104)  (3,263,008)
CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on capital lease               (130,633)    (127,477)
    Proceeds from bank loans                          3,041,002    2,213,264
    Repayments of bank loans                          (2,240,739)  (1,897,083)
    (Increase) decrease in restricted cash            (1,312,433)  31,618
    Increase (decrease) in bank acceptance notes
                                                      1,312,433    (31,618)
    payable
    Net proceeds from sale of common stock            1,767,546    -
    Proceeds from exercise of warrants                -            198,142
NET CASH PROVIDED BY FINANCING ACTIVITIES             2,437,176    386,846
EFFECT OF EXCHANGE RATE ON CASH AND CASH
                                                      27,354       6,551
EQUIVALENTS
NET INCREASE IN CASH AND CASH EQUIVALENTS             1,809,253    154,705
CASH AND CASH EQUIVALENTS - beginning of period       1,445,728    1,152,607
CASH AND CASH EQUIVALENTS - end of period             $3,254,981   $1,307,312
SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION:
 Cash paid for:
                       Interest                       $169,653     $160,396
                       Income taxes                   $1,374,120   $777,646
NON-CASH INVESTING AND FINANCING

ACTIVITIES:
 Property and equipment acquired on credit as         $840,277     -
 payable
 Series A preferred converted to common shares        -            $13,198
 Common stock issued for future service               -            $54,800



Reconciliation of Net Income to EBITDA
(Amounts expressed in US$)
                         For the Three Months Ended   For the Six Months Ended

                         June 30,                     June 30,
                         2013           2012          2013          2012
Net income             $ 2,322,553   $  1,071,370   $ 3,945,153   $ 1,374,165
Add: income tax          723,978        435,130       1,310,538     665,545
Add: interest expense    64,526         70,363        169,653       160,396
Add: warrant             -              -             -             235,133
modification expense
Add: depreciation and    1,675,404      1,568,510     3,268,466     3,139,238
amortization
Adjusted EBITDA        $ 4,786,461   $  3,145,373   $ 8,693,810   $ 5,574,477
Reconciliation of Non GAAP Operating Income, Net Income and EPS
(Amounts expressed in US$)
                         For the Three Months Ended   For the Six Months Ended

                         June 30,                     June 30,
                         2013           2012          2013          2012
Net income               $2,322,553     $1,071,370    $3,945,153    $1,374,165
Add:warrant             -              -             -             $235,133
modification expense
Adjusted net income      $2,322,553     $1,071,370    $3,945,153    $1,609,298
Weighted average         2,955,786      2,660,983     2,925,355     2,592,864
shares - diluted
Adjusted diluted EPS     $0.79          $0.40         $1.35         $0.62

SOURCE Cleantech Solutions International, Inc.

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