Cleantech Solutions International Reports Third Quarter 2013 Results

     Cleantech Solutions International Reports Third Quarter 2013 Results

PR Newswire

WUXI, China, Nov. 13, 2013

WUXI, China, Nov. 13, 2013 /PRNewswire-FirstCall/ -- Cleantech Solutions
International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a
manufacturer of metal components and assemblies used in various clean
technology and manufacturing industries and textile dyeing and finishing
machines, today announced its financial results for the three and nine months
ended September 30, 2013.

"In the third quarter, we saw modest growth in revenue, were profitable and
generated strong operating cash flow. Our dyeing machine segment continued to
perform well, supported by growing adoption of our low-emission airflow dyeing
machines. This increase was offset by a decrease in sales of forged rolled
rings and related products for industries other than the wind power industry,"
said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. "We are in the
process of installing equipment that will expand capacity of our dyeing
equipment segment and allow us to produce new, higher-end machines that we
expect to drive improvements in our competitive position and financial results
in 2014. We are also encouraged by recent discussions with our solar customer
and expect to see some traction in this area soon, although we did not
generate any revenue from solar products during the third quarter and we have
no backlog of orders from these products."

Third Quarter 2013 Results

Revenue for the third quarter of 2013 increased 5.0% to $18.2 million,
compared to $17.3 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, the Company experienced
a modest increase in sales for forged rolled rings and related products for
customers in the wind power industry, which was offset by a decline in sales
of forged products from customers in other industries.

The increase in revenue is summarized as follows:

  oRevenue from the dyeing and finishing equipment segment increased 26.2% to
    $9.5 million, compared to $7.5 million for the third quarter of 2012.
  oRevenue from the sale of forged rolled rings to other industries decreased
    24.4% to $5.0 million, compared with $6.6 million for the comparable
    period of the prior year.
  oRevenue from the sale of forged rolled rings for the wind power industry
    rose 16.0% to $3.7 million, compared to $3.2 million for the comparable
    period last year.

Gross profit for the third quarter of 2013 increased 7.3% to $4.6 million,
compared to $4.3 million for the same period in 2012. Gross margin increased
to 25.5% during the third quarter of 2013 compared to 24.9% for the same
period a year ago. The increase in gross margin for the third quarter was
primarily attributable to (i) 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 and (ii) a slight decrease in raw
materials costs in both the forged rolled rings and related products and
dyeing equipment segments.

Operating expenses rose 28.1% to $1.4 million, compared to $1.1 million in the
comparable period last year. The increase was primarily due to bad debt
expense, partially offset by 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 third quarter of 2012 but not in
the third quarter of 2013.

Selling, general and administrative expenses for the three months ended
September 30, 2013 rose 78.1% to $1.3 million, primarily due to a $0.4 million
bad debt expense, an increase in stock based compensation expenses and an
increase in research and development expense related to the Company's new
dyeing equipment.

Operating income was $3.2 million, unchanged from the same period of 2012.
Operating margin was 17.6% compared to 18.5% in the third quarter last year.

Adjusted EBITDA, a non-GAAP measurement, which adds back to net income
interest expense, income tax, depreciation and amortization, was $4.9 million,
which is the same as for the third quarter last year. The calculation of
adjusted EBITDA is shown in a table following the financial tables.

Net income for the third quarter of 2013 was $2.1 million, or $0.61 per
diluted share, compared to $2.4 million, or $0.88 per diluted share, in the
third quarter of 2012.Diluted earnings per share were calculated using
diluted weighted average shares of 3,479,646 and 2,667,017 for the three
months ended September 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.

Nine Month Results

For the nine months ended September 30, 2013, revenue increased 24.6% to$49.3
million from $39.6 millionin the first nine months of 2012. Gross profit
increased 32.0% to$11.7 million, compared to$8.9 millionin the same period
last year. Gross margin for first nine months of 2013 was 23.8%, compared to
22.5% in the first nine months of 2012. Operating income increased 53.2%
to$8.6 millionfrom$5.6 millionin the first nine months of 2012. Adjusted
EBITDA, a non-GAAP measurement which adds interest expense, income tax,
warrant modification expense (which was incurred in the first quarter of
2012), depreciation and amortization back to net income, was$13.6 million,
compared to$10.5 millionin the first nine months of 2012.Net income
was$6.1 million, or$1.95per diluted share, up from $3.7 million,
or$1.42per diluted share, in the first nine months 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 September 30, 2013, Cleantech Solutions held cash and cash equivalents
of $2.2 million compared with $1.4 million at December 31, 2012.Accounts
receivable were $11.5 million and total current assets of $23.6 million as of
September 30, 2013. The Company had $3.1 million in short-term bank loans
payable at September 30, 2013, up from $2.2 million at December 31,
2012.Stockholders' equity was $88.8 million at September 30, 2013.

In the first nine months of 2013, the Company generated $7.9 million in cash
flow from operations. The increase in short term loans, combined with $2.4
million in net proceeds from the sale of shares issued in the second and third
quarters of 2013 and cash flow from operations was used to fund approximately
$9.9 million in capital expenditures to expand production capabilities and
purchase equipment for the Company's dyeing and finishing equipment segment.

Upcoming Events

Cleantech Solutions will hold its annual meeting of stockholders on December
10, 2013.The board of directors has fixed the close of business on October
23, 2013 as the record date for the determination of stockholders entitled to
notice of and to vote at the annual meeting.The proxy statement is available
on the SEC's website and Company's website at
http://www.cleantechsolutionsinternational.com/sec.php.

Business Outlook

Based on current and anticipated orders, for the full year endingDecember 31,
2013,the Company expects revenue in the range of$60 - $62 millionand net
income in the range of$8.0 - $8.5 million, excluding the impact of any
year-end adjustments to the carrying value of equipment held for sale.

"As we approach the end of 2013, we expect our dyeing machine segment to
continue to be our main revenue driver in the fourth quarter and beyond.We
are encouraged by the improving Chinese economy although tight credit
conditions are likely to persist. This is causing many manufacturers to focus
on the quality and durability of their equipment purchases rather than price
alone.We believe our new line of high-end airflow and traditional dyeing
machines and our after treatment compacting machine position our Company for
further growth in 2014."

"We are also hopeful that we will secure orders for solar products in the near
future and for our new oil and gas products in 2014, although we cannot
predict the timing or extent of any sales. The wind power market continues to
face near-term challenges, and we expect sales to customers in this industry
to remain near current levels.We will continue to utilize our assets and
modify our product lines with a view of achieving strong financial performance
and respond to the needs of heavy equipment and clean technology industries,"
Mr. Wu concluded.

Conference Call

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Time
on Wednesday, November 13, 2013 to discuss financial results for the third
quarter ended September 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: (877)
870-4263. International callers should dial (412) 397-0790.

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 November 20, 2013. To access the replay, dial (877) 344-7529.
International callers dial (412) 317-0088, and enter conference number:
10036945.

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 used
in various clean technology and manufacturing industries and textile dyeing
and finishing machines. The Company supplies forging products, fabricated
products and machining services to a range of clean technology and
manufacturing customers 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 September 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       For the Nine Months
                                             Ended                       Ended
                                             September 30,               September 30,
                                             2013          2012          2013          2012
REVENUES                                     $ 18,213,508  $ 17,343,723  $ 49,312,341  $ 39,585,815
COST OF REVENUES                               13,576,808    13,024,265    37,572,531    30,689,436
GROSS PROFIT                                   4,636,700     4,319,458     11,739,810    8,896,379
OPERATING EXPENSES:
Depreciation                              109,652       373,896       461,539       1,122,432
Selling, general and administrative       1,316,925     739,386       2,675,076     2,157,053
Total Operating Expenses             1,426,577     1,113,282     3,136,615     3,279,485
INCOME FROM OPERATIONS                         3,210,123     3,206,176     8,603,195     5,616,894
OTHER INCOME (EXPENSE):
Interest income                           14,840        5,069         16,009        10,919
Interest expense                          (74,638)      (84,289)      (244,291)     (244,685)
Foreign currency (loss) gain              (9,821)       1,251         (15,800)      6,642
Warrant modification expense              -             -             -             (235,133)
Other income                              5,933         51,523        43,015        64,803
Total Other Income (Expense), net    (63,686)      (26,446)      (201,067)     (397,454)
INCOME BEFORE INCOME TAXES                     3,146,437     3,179,730     8,402,128     5,219,440
INCOME TAXES                                   1,015,701     824,628       2,326,239     1,490,173
NET INCOME                                   $ 2,130,736   $ 2,355,102   $ 6,075,889   $ 3,729,267
COMPREHENSIVE INCOME:
NET INCOME                              $ 2,130,736   $ 2,355,102   $ 6,075,889   $ 3,729,267
OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency               516,244       (169,625)     2,161,711     342,015
translation gain (loss)
COMPREHENSIVE INCOME                         $ 2,646,980   $ 2,185,477   $ 8,237,600   $ 4,071,282
NET INCOME PER COMMON SHARE:
Basic                                   $ 0.61        $ 0.88        $ 1.95        $ 1.51
Diluted                                 $ 0.61        $ 0.88        $ 1.95        $ 1.42
WEIGHTEDAVERAGECOMMONSHARESOUTSTANDING:
Basic                                     3,479,646     2,667,017     3,112,148     2,469,818
Diluted                                   3,479,646     2,667,017     3,112,148     2,617,798



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                                   September      December
                                                   30, 2013       31, 2012
                                                   (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                     $ 2,223,017    $ 1,445,728
Restricted cash                                 796,567        -
Notes receivable                                485,793        88,029
Accounts receivable, net of allowance for       11,545,834     10,078,623
doubtful accounts
Inventories, net of reserve for obsolete        6,216,215      5,897,555
inventory
Advances to suppliers                           1,303,911      593,104
Prepaid VAT on purchases                        830,361        542,032
Prepaid expenses and other                      227,651        428,326
Total Current Assets                       23,629,349     19,073,397
PROPERTY AND EQUIPMENT - net                         66,699,091     59,436,100
OTHER ASSETS:
Deferred tax assets                             566,666        551,890
Equipment held for sale                         7,309,150      7,118,555
Land use rights, net                            3,784,841      3,756,342
Total Assets                             $ 101,989,097  $ 89,936,284
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank loans                         $ 3,088,728    $ 2,216,558
Bank acceptance notes payable                   796,567        -
Accounts payable                                5,494,461      5,474,479
Accrued expenses                                552,758        986,824
Capital lease obligation - current portion      -              251,413
Advances from customers                         2,210,102      1,851,987
VAT and service taxes payable                   -              206,527
Income taxes payable                            1,069,434      822,082
Total Current Liabilities                  13,212,050     11,809,870
OTHER LIABILITIES:
Capital lease obligation - net of current       -              132,756
portion
Total Liabilities                          13,212,050     11,942,626
STOCKHOLDERS' EQUITY:
Preferred stock ($0.001 par value;
10,000,000 shares authorized;

0 share issued and outstanding at September     -              -
30, 2013 and

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

3,503,502 and 2,894,586 shares issued and       3,503          2,894
outstanding at September

30, 2013 and December 31, 2012,
respectively)
Additional paid-in capital                      31,532,308     28,987,128
Retained earnings                               44,200,317     38,401,734
Statutory reserve                               2,757,044      2,479,738
Accumulated other comprehensive gain -          10,283,875     8,122,164
foreign currency translation adjustment
Total Stockholders' Equity                 88,777,047     77,993,658
Total Liabilities and Stockholders'     $ 101,989,097  $ 89,936,284
Equity



CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  For the Nine Months Ended
                                                  September 30,
                                                  2013           2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                     $ 6,075,889    $ 3,729,267
Adjustments to reconcile net income from
operations to net cash
provided by operating activities:
Depreciation                                   4,882,899      4,719,769
Amortization of land use rights                71,261         70,068
Increase (decrease) in allowance for           76,784         (46,616)
doubtful accounts
Warrant modification expense                   -              235,133
Stock-based compensation expense               278,034        129,030
Changes in operating assets and liabilities:
Notes receivable                               (390,950)      (112,209)
Accounts receivable                            (1,260,651)    (3,368,092)
Inventories                                    (158,944)      (1,925,810)
Prepaid value-added taxes on purchases         (270,730)      844,969
Prepaid and other current assets               82,378         (41,315)
Advances to suppliers                          (687,094)      (627,455)
Accounts payable                               (672,461)      1,310,123
Accrued expenses                               (451,672)      (49,578)
VAT and service taxes payable                  (209,667)      -
Income taxes payable                           222,801        289,230
Advances from customers                        305,052        668,446
NET CASH PROVIDED BY OPERATING ACTIVITIES           7,892,929      5,824,960
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment             (9,943,309)    (6,334,776)
NET CASH USED IN INVESTING ACTIVITIES               (9,943,309)    (6,334,776)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease            (390,009)      (205,509)
Proceeds from bank loans                       4,821,973      2,686,706
Repayments of bank loans                       (4,018,311)    (2,370,623)
(Increase) decrease in restricted cash         (787,589)      316,083
Increase (decrease) in bank acceptance         787,589        (316,083)
notes payable
Net proceeds from sale of common stock         2,388,589      -
Proceeds from exercise of warrants             -              198,142
NET CASH PROVIDED BY FINANCING ACTIVITIES           2,802,242      308,716
EFFECT OF EXCHANGE RATE ON CASH AND CASH            25,427         3,898
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH            777,289        (197,202)
EQUIVALENTS
CASH AND CASH EQUIVALENTS - beginning of period     1,445,728      1,152,607
CASH AND CASH EQUIVALENTS - end of period         $ 2,223,017    $ 955,405
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest                                $ 244,291      $ 244,685
Income taxes                            $ 2,103,438    $ 1,200,944
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on credit    $ 547,294      $ -
as payable
Series A preferred converted to common       $ -            $ 13,198
shares
Common stock issued for future service       $ 78,600       $ 27,440



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

                             Ended September 30,        Ended September 30,
                             2013          2012         2013          2012
Net income                 $ 2,130,736   $ 2,355,102  $ 6,075,889   $ 3,729,267
Add: income tax              1,015,701     824,628      2,326,239     1,490,173
Add: interest expense        74,638        84,289       244,291       244,685
Add: warrant modification
                             -             -            -             235,133
expense
Add: depreciation and
                             1,685,694     1,650,599    4,954,160     4,789,837
amortization
Adjusted EBITDA            $ 4,906,769   $ $4,914,618 $ 13,600,579  $ 10,489,095
Reconciliation of Non GAAP Operating Income, Net Income and EPS
(Amounts expressed in US$)
                             For the Three Months       For the Nine Months

                             Ended September 30,        Ended September 30,
                             2013          2012         2013          2012
Net income                   $2,130,736    $2,355,102   $6,075,889    $3,729,267
Add:warrantmodification
                             -             -            -             235,133
expense
Adjusted net income          $2,130,736    $2,355,102   $6,075,889    $3,964,400
Weighted average shares -
                             3,479,646     2,667,017    3,112,148     2,617,798
diluted
Adjusted diluted EPS         $0.61         $0.88        $1.95         $1.51



SOURCE Cleantech Solutions International, Inc.

Website: http://www.cleantechsolutionsinternational.com/sec.php
Website: http://www.cleantechsolutionsinternational.com
 
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