China Recycling Energy Corporation Reports Fourth Quarter and Full Year 2014 FinancialResultsInterest Income on Sales-Type Leases in 2014 Up 36.8%Year-over-Year
XI'AN,
Fourth Quarter 2014 Unaudited Financial Highlights · Interest income on sales-typeleases increased 24.9% to US$6.98 million from US$5.59 million for the fourthquarter of 2013. · Total sales wereUS$0.12 million, comparedwith US$13.20 million for the fourth quarter of 2013 as no powergeneration system was completed and sold in the fourth quarter of 2014. · Net income was US$5.33million, up 26.8% from US$4.20 million for the fourthquarter of 2013. · Basic and fully dilutedearningsper share (EPS) was US$0.06, as compared with US$0.07 for the fourthquarter of 2013. Full Year 2014 Audited Financial Highlights · Interest income onsales-type leases increased 36.8% to US$26.46 million from US$19.34 million in2013. · Total sales wereUS$19.66 million, comparedwith US$63.19 million in 2013. · Net income was US$19.81million, up 26.8% fromUS$15.63 million in 2013. · Basic and fully diluted earnings per share(EPS) wasUS$0.28, as compared with US$0.29 in 2013.
Summaryof Financial Results:
Mr. Guohua Ku,Chairman and CEO of CREG commented, “We are very happy to report solid growthin our interest income on sales-type leases and net income for the fourthquarter of 2014. On a yearly basis, interest income on sales-type leases, themajor and consistent regular revenue for the Company, increased 36.8% while netincome increased 26.8%. With six projects under construction for a totalcapacity of 135MW, we look confidently to our future. We expect that a WGPGsystem to Shanxi Datong Coal Group and a CDQ system to Shandong Boxing will becompleted in the second quarter of 2015. These two systems have a totalcapacity of 40MW. Given continued favorable governmentpolicies, more stringent environmental protectionrequirements from the government and rising awareness for energy recovery inenergy-intensive industries, we continue to see strong market demand for ourwaste energy recycling systems.”
FullYear 2014 Audited Financial Results SALES. Totalsales, including sales of systems and contingent rental income, were US$19.66 million for the full year of 2014, adecrease of US$43.53 million as compared with US$63.19million in 2013, mainly due to fewer systems completed and sold in 2014.
Salesof systems for the full year of 2014 were US$18.87, as comparedwithUS$62.01 million in 2013. In2014, the Yida system wascompleted and sold, while the ShenqiuPhase II system, the Shanxi Datong Phase Isystem, the Pucheng Biomass Phase IIsystem and the Jitie system were completed and sold in 2013.For the full year of 2014, the Companyreceived contingent rental income of US$0.79 million from the usage ofelectricity in addition to the minimum lease payments, compared to US$1.18million in 2013. For sales-type leases, sales and cost of salesarerecorded at the time of the leasecommencement; in additionto systems sales revenue, CREG’s other major source ofrevenues is interest income from sales-type leases.
COST OF SALES. Cost ofsales for the full year of 2014 was US$14.59 million, as compared with US$47.85million in 2013. The decrease was mainly due to fewersystems completed and sold in 2014.
GROSS PROFITand GROSS MARGIN. Gross profitwas US$5.07 million for the full year of 2014, as compared with US$15.35 millionin 2013. Blended gross margin for the full year of 2014 was 26%, compared with24% in 2013.
INTEREST INCOME ON SALES TYPE LEASES. Interestincome on sales-type leases, which is a major andconsistent regular revenue for the Company,was US$26.46 million for the full year of 2014, anincrease of 36.8% from US$19.34 million in 2013. In 2014, interest income was derived from sixteen sales-typeleases, including the CHPG system at Jing Yang Shengwei (5yearterm, expired onJune 30, 2014), the TRT system at Zhangzhi (13 yearterm originally but terminated early on September 24, 2014), theBMPG systems at Pucheng Phase I and II (15 year and 11.9 year term,respectively), the BMPG systems at Shenqiu Phase I and II (11 year and 9.5 yearterm, respectively), five power and steam generating systems at Erdos (20 yearterm), the WHPG system at Zhong Gang(9 year term originally but terminated early on December22, 2014), the WHPG systems at Jitie (24year term), two BPRT systems at Datong (30 year term), and the WGPG system atYida (15 years). In comparison, interest income on sales-type leases wasderived from fifteen systems in 2013.
OPERATING EXPENSES. Operating expenses totaled US$3.49million for the full year of 2014, a decrease of 16.0% as compared with US$4.16million in 2013, mainly due to a US$0.59million decrease in consulting expenses compared to 2013.
NON-OPERATINGINCOME (EXPENSES).Non-operatingexpenses consisted of non-sales-type lease interest income, interest expenses, bank charges and miscellaneous expenses. For the full year of 2014,net non-operating expenses were US$2.20 million, compared with US$7.83 million in 2013. Forthe full year of 2014, the Company had US$3.43million in interest expense on loans, and US$1.02million in other income consisting mainly of US$0.93million in income from the sale of a TRT system to Zhangzhi and US$1.76 million in income from the sale of a WHPG system to Zhong Gang,but offset by US$1.58 million in financialexpenses. In addition, the Company had US$0.19 million in interest income in2014. For the full year of 2013, the Company had US$6.72million in interest expense on loans, a US$1.29million one-time commission to the fund management company for initiating andcompleting a RMB460 million (US$75.0million) financing for the Company, and US$0.23million in interest income. INCOME TAX EXPENSE. Income taxexpense was US$6.11 million forthe full year of 2014, decreasedby 11.3% as compared withUS$6.89 million in 2013. Thedecrease in income tax expense was mainlydue to a decrease in the consolidatedeffective income tax rate, which was 23.7% in 2014, compared with 30.3% in2013. This is mainly due to the 15% preferential income tax rate of theCompany's wholly owned subsidiary Xi'an TCH in 2014, and income tax rate ofXi'an TCH for the year of 2013 was 25%. In July 2013, Xi'an TCH wasre-approved for high-tech enterprise status and enjoyed a 15% preferentialincome tax rate effective January 1, 2013.
NET INCOME. Net income for the full yearof 2014 was US$19.81 million, an increase of 26.8% ascompared with US$15.63 million in2013. This increase in net income was mainly due to the increased interestincome on sales-type leases and lower non-operating expensesin2014 compared to 2013.
For the full year of 2014, basic andfully diluted EPS was US$0.28, compared with US$0.29 in 2013.
Financial Position as of December 31, 2014 As of December 31, 2014, the Company had cashand cash equivalents of US$35.87 million compared with US$7.70 million as ofDecember 31, 2013. Other current assets were US$9.70 million and currentliabilities were US$26.66 million.Total shareholders' equity was US$207.86 million comparedwith US$154.68 million as of December 31, 2013. The net tangible assetper share was US$2.50 as of December31, 2014.
Net Investment in Sales-Type Leases as of December31, 2014 Thecomponents of the net investment in sales-type leasesas of December 31, 2014 and December 31, 2013are as follows:
As of December 31, 2014, the future minimum rentalsto be received on non-cancelable sales-type leases by years were asfollows:
Recent Business Development At theend of December, 2014, the Company transferred its Waste Heat Power GenerationSystem ("WHPG System") system originally leased to Zhong Gang GroupBin Hai Industry Co., Ltd. ("Zhong Gang") to Zhong Gang for a price of aboutUS$9.8 million (RMB60.0 million). Under the original lease contract, CREGwas leasing the WHPG System to Zhong Gang for 9 years from the daythe system became operational in October 2010 until September 2019. Accordingto Company's estimates, thesystem transfer price is fairly close to thediscounted cash flow value of the total principal repayment and interest incomeon sales-type leases of US$11.3 million (RMB69.3 million) receivable by theCompany during the period from January 1, 2015 to September 30, 2019.
Financial Results Conference Call The Company will host a conference call at 8:00 a.m. EST on Tuesday, March 24, 2015, to discuss the Company's fourthquarter and full year 2014 financial results. Mr. Guohua Ku, Chief ExecutiveOfficer, and Mr. David Chong, Chief Financial Officer, will be hosting thecall.
Listeners may access the call by dialing: International: +1-412-902-4272 US Toll Free: 1-888-346-8982 Conference Reference: China Recycling Energy Corp. conference call
A telephone replay will be available shortly after the call until March 31,2015 by dialing the following numbers:
International: +1-412-317-0088 US Toll Free: 1-877-344-7529 Replay Access Code: 10062384
10KFiling For more information regarding China Recycling Energy Corp.'s financialperformance during the full year ended December31, 2014, please refer to the Annual Report on Form 10-K, which was filed withthe Securities and Exchange Commission on March 23, 2015.
About China Recycling Energy Corp. (NASDAQ: CREG) ("CREG" or "theCompany") is based in Xi'an,
Safe Harbor Statement This press release may contain certain "forward-lookingstatements" relating to the business of China Recycling Energy Corp. andits subsidiary companies. All statements, other than statements of historicalfact included herein are "forward-looking statements." Theseforward-looking statements are often identified by the use of forward-lookingterminology such as "believes," "expects" or similarexpressions, involve known and unknown risks and uncertainties. Although the Companybelieves that the expectations reflected in these forward-looking statementsare reasonable, they do involve assumptions, risks and uncertainties, and theseexpectations may prove to be incorrect. Investors should not place unduereliance on these forward-looking statements, which speak only as of the dateof this press release. The Company's actual results could differ materiallyfrom those anticipated in these forward-looking statements as a result of avariety of factors, including those discussed in the Company's periodic reportsthat are filed with the Securities and Exchange Commission and available on itswebsite at http://www.sec.gov. Allforward-looking statements attributable to the Company or persons acting on itsbehalf are expressly qualified in their entirety by these factors. Other thanas required under the securities laws, the Company does not assume a duty toupdate these forward-looking statements.
For more information, please contact: Mr. David Chong, Chief Financial Officer Email: chongscd@creg-cn.com
Christensen
Ms. Xiaoyan Su( Vice President Tel: +86-10-5900-3429 Email: xsu@christensenir.com
Mr. Christian Arnell ( Vice President Phone: +86-10-5900-1548 E-mail: carnell@christensenir.com
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