China Recycling Energy Corp. Announces First Quarter 2008 Financial Results
Fri May 16, 2:06 AMXI'AN, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- China Recycling Energy Corp. (OTC Bulletin Board: CREG.OB) ("CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its 2008 first quarter financial results for the three months ended March 31, 2008.
Financial Results Overview
During the first quarter of 2008, the Company generated revenues of US$564,952. The revenues were mainly from interest income on sales-type leases for energy-saving equipment. The Company changed its line of business during the first quarter of 2007, as it discontinued the mobile phone business and began solely selling, assembling and installing energy-saving equipment during the period. The income from discontinued operations was US$23,105 for the quarter ended March 31, 2007. The Company now sells its equipment through sales-type leasing.
"We are very excited about our new strategic move into China's alternative-energy space," said Mr. Guangyu Wu, CEO of CREG. "Since 2006, we have already established working relations with six steel, cement and chemical manufacturers in China and so far implemented four waste-to-energy projects for them with a combined total of about US$10 million in annual estimated revenues. We are in the process of building three additional projects with revenue generation to begin from May to October this year with a combined total of about US$10 million in annual estimated revenues."
Mr. Wu continued, "As industrial firms in China continue to fend off mounting utility bills and tightening pollution regulations, we believe we are offering a very cost-effective and environmentally conscious solution for these fast-growing Chinese steel mills, cement factories and chemical plants to save and rationalize their energy use."
General and administrative expenses were US$648,610 for the first quarter ended March 31, 2008, an increase of 152% from US$257,042 for the three months ended March 31, 2007. This increase was mainly due to option compensation expense of US$325,155 to employees that was vested during the quarter. The operating loss for the first quarter of 2008 amounted to US$83,658 compared with an operating profit of US$896,539 for the same period in 2007.
Net loss for the first quarter of 2008 was US$887,940, or US$0.04 loss per diluted share, as compared to a net income of US$759,437, or US$0.04 earnings per diluted share, in the same period one year ago. This decrease in net income (loss) was mainly due to non-operating expenses of US$753,308 for the quarter, of which US$623,288 was related to the amortized beneficial conversion feature for the convertible note, and US$124,658 was accrued interest expense on the same convertible note.
Excluding total non-operating expense of US$753,308 as well as the US$325,155 in stock compensation expense as noted above, net income for the quarter amounted to US$190,523.
Balance Sheet
CREG's balance sheet at March 31, 2008 included cash and cash equivalents of US$797,601, investments in sales-type leases amounting to US$1.09 million, working capital of US$8.39 million, and shareholders' equity of US$17.45 million.
Update on Recent Projects
In March 2008, the Company signed an agreement with Changzhi Steel ("Changzhi") for Changzhi to purchase the electricity generated by our new TRT power generator project at 0.385 RMB per kilo watt hour ("KWH") for 13 years. The Company will invest US$3.6 million on this new 6 million-watts-capacity TRT power generator project, including design, model selection, equipment purchase and installment, construction and, management, maintenance and operation of the project after putting it into production. The Company will use the Build-Operate-Transfer ("BOT") model to build and operate the project. Under the BOT model, the company will build and operate the facility during the contract term and charge for fees and will transfer the facility to the lessee at the end of the term. This system will be able to maintain 8,300 annual operating hours once it is put into operation.
In November 2007, the Company signed a cooperative agreement with Shengwei Group for a Cement Waste Heat Power Generator Project. The Company will build two sets of 12 million watts pure, low-temperature cement waste heat power generator systems for its two 2,500 tons per day cement manufacturing lines in Jin Yang and its 5,000 tons per day cement manufacturing line in Tong Chuan. The Company has finished the selection of equipment and equipment bidding process, and commenced construction during the first quarter of 2008. The Company's total investment will be approximately US$13.7 million with estimated annual power generated capacity of 120 million KWH once the two systems are put into operation. The Company will use the BOT model to build and operate the systems. The operating period for the systems will be five years. During the operating period, Shengwei Group will pay the Company the monthly electricity fee based on the actual power generated by the systems at 0.4116 RMB per KWH as agreed.
As of May 15, 2008, the Company had four waste-to-energy projects in operation servicing Chinese steel and cement factories, with three more projects under construction.
Full Years 2008 and 2009 Guidance
The Company expects revenues for the 2008 year to be in the range of US$17 million to US$19 million and net income, excluding non-cash items, in the range of US$4.5 million to US$5 million.
The Company expects revenues for the 2009 year to be in the range of US$33 million and US$36 million, with net income, excluding non-cash items, of approximately US$10 million.
These targets are based on the Company's current views on the operating and market conditions, which are subject to change.
About China Recycling Energy Corp.
China Recycling Energy Corp. (OTCBB: CREG.OB) ("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 0.1% 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:
In China:
Mr. Zhigang Wu
Investor Relations
China Recycling Energy Corp.
Tel: +86-29-8765-1096
Email: tch@creg-cn.com
In the U.S.:
Mr. Valentine Ding
Investor Relations
Grayling Global
Tel: +1-646-284-9412
Email: vding@hfgcg.com
China Recycling Energy Corporation and Subsidiaries
Consolidated Balance Sheet (unaudited in US$)
As of March 31, 2008
ASSETS
CURRENT ASSETS
Cash & cash equivalents $797,601
Investment in sales type
leases, net 1,093,493
Interest receivable 239,165
Advances to suppliers 2,566,320
Prepaid expenses 227,086
Inventory 10,257,871
Total current assets 15,181,536
INVESTMENT IN SALES TYPE
LEASES, NET 7,995,916
PROPERTY AND EQUIPMENT, net 82,459
CONSTRUCTION IN PROGRESS 997,293
TOTAL ASSETS $24,257,204
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable $2,317,275
Tax payable 426,938
Accrued liabilities and
other payables 2,669,459
Advance from shareholder 250,000
Interest payable 187,672
Convertible notes, net
of discount due to
beneficial
conversion feature 938,356
Total current
liabilities 6,789,700
CONTINGENCIES
CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 15,699
STOCKHOLDERS' EQUITY
Common stock, $0.001 par
value; 100,000,000
shares authorized,
25,015,089 shares
issued
and outstanding 25,015
Additional paid in
capital 19,396,062
Statutory reserve 855,677
Accumulated other
comprehensive income 1,792,986
Accumulated deficit (4,617,935)
Total stockholders'
equity 17,451,805
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $24,257,204
China Recycling Energy Corporation and Subsidiaries
Consolidated Statement of Operations (unaudited in US$)
FOR THE THREE MONTHS ENDED MARCH 31,
2008 2007
(RESTATED)
Net sales -- $4,781,163
Cost of sales -- (3,677,818)
Gross profit -- 1,103,345
Interest income on sales-type
leases 564,952 50,236
Total operating income 564,952 1,153,581
Operating expenses
General and administrative
expenses (648,610) (257,042)
Total operating expenses (648,610) (257,042)
Income (loss) from operations (83,658) 896,539
Non-operating income (expenses)
Other income 1,581 --
Interest (expense) income (743,278) 45
Financial expense (422) (95)
Exchange loss (11,189) --
Total non-operating expenses (753,308) (50)
Income (loss) before income tax (836,966) 896,489
Income tax expense (50,947) (160,157)
Net income (loss) from continuing
operations (887,913) 736,332
Income from operations of
discontinued component -- 23,105
Minority interest (27) --
Net income (loss) (887,940) 759,437
Other comprehensive item
Foreign currency translation 74,725 (343,992)
Comprehensive Income (loss) (813,215) 415,445
Basic weighted average shares
outstanding 25,015,089 17,147,268
Diluted weighted average shares
outstanding 30,508,410 17,147,268
Basic net earnings (loss) per share ($0.04) $0.04
Diluted net earnings (loss) per
share ($0.04) $0.04
China Recycling Energy Corporation and Subsidiaries
Consolidated Statement of Cash Flows (unaudited in US$)
As of March 31, 2008
FOR THE THREE MONTHS ENDED MARCH 31,
2008 2007
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($887,940) $759,437
Adjustments to
reconcile net (loss)
income to net cash
provided by (used in)
operating
activities:
Depreciation and
amortization 17 --
Amortization of
discount related to
conversion
feature of
convertible
note 623,288 --
Stock option
compensation expense 325,155 --
Minority interest 27 --
(Increase)
decrease in
current assets:
Advances to suppliers (192,463) 471,646
Interest receivable (94,903) --
Other receivable 1,622 --
Inventory -- (1,301,848)
Increase
(decrease) in
current
liabilities:
Accounts payable (69,737) 2,331,984
Unearned revenue -- 263,786
Advance from customers -- (142,743)
Tax payable (125,995) 184,952
Interest payable 124,658 --
Accrued liabilities and other
payables 17,227 1,794,773
Net cash (used in)
provided by
operating activities (279,044) 4,361,987
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in sales-type leases 282,188 (4,618,779)
Acquisition of property &
equipment (80,823) --
Construction in progress (977,299) (1,578)
Net cash used in
investing activities (775,934) (4,620,357)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment to management (72,826) --
Advance from shareholder 250,000 15,302
Net cash provided by
financing activities 177,174 15,302
EFFECT OF EXCHANGE RATE CHANGE ON
CASH & CASH EQUIVALENTS 41,065 2,007
NET INCREASE (DECREASE) IN CASH &
CASH EQUIVALENTS (877,804) (243,068)
CASH & CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,634,340 252,125
CASH & CASH EQUIVALENTS, END OF
PERIOD 797,601 11,064
Supplemental Cash flow data:
Income tax paid 127,336 35,281
Interest paid -- --
Reconciliation of GAAP Financial Information to Non-GAAP Financial
Information
1Q08
Operating Expenses
GAAP $ (648,610)
Items Excluded:
Option Compensation Expenses (325,155)
Non-GAAP (323,455)
Operating Income (Loss)
GAAP (83,658)
Items Excluded:
Option Compensation Expenses (325,155)
Non-GAAP 241,497
Net Income (Loss)
GAAP (887,940)
Items Excluded:
Option Compensation Expenses (325,155)
Non-operating Expenses (753,308)
Non-GAAP 190,523
SOURCE China Recycling Energy Corporation
2.28 (0.02%)
