Teleconference to Be Held Friday, May 15, 2009, at 8:30 a.m. EDT
XI'AN, China, May 14 /PRNewswire-Asia-FirstCall/ -- China Recycling
Energy Corp. (OTC:CREG) (BULLETIN BOARD: CREG) ("CREG" or "the
Company"), a leading industrial waste-to-energy solution provider
in China, today announced unaudited financial results for the first
quarter of 2009 ended March 31, 2009. First Quarter 2009 Highlights
-- Revenue was $4.3 million, vs. zero in the same period of 2008 --
Gross margin was 30.2% vs. 25.5% in the fourth quarter of 2008 --
Interest income from sales-type leases was $1.2 million vs.
$565,000 in the same quarter of 2008 -- Net income was 1.1 million,
Diluted EPS $0.02 vs. net loss $888,000, diluted EPS (0.04) in the
same quarter of 2008 -- Non-GAAP net operating income, as defined
below, was $2.1 million; Non-GAAP diluted EPS $0.03 -- Cash on hand
at March 31, 2009 was $10.2 million, vs. $7.3 million at year-end
2008 -- Net cash flow provided by operations in the first quarter
of 2009 was $4.4 million, compared with net cash used in operation
of $279,000 in the same period of 2008 "I am pleased with our
continued profitability since the third quarter of last year and
our steady revenue streams from operational rental business and
interest income from sales-type leases," Mr. Guohua Ku, Chairman
and CEO of CREG, said. "Our business model is working and our cash
flow has continued to be positive since late last year. If the
macro economic environment continues to improve and the Chinese
government continues to induce more clean energy generation, with
the recent $7.9 million capital raise and our electricity-
generation Joint Venture with Inner Mongolia Erdos Metallurgy Co.,
Ltd., the largest iron-alloy production facilities in China, we are
confident to apply our financial resources and our engineering
prowess to pursue large-scale, clustered power system projects."
Summary of Financial Results (In '000s of U.S. Dollars, except for
per share data) FOR THE THREE MONTHS ENDED MAR. 31, DEC. 31, MAR.
31, 2008 2008 2009 Revenue --- 12,341 4,323 Gross profit --- 3,150
1,301 Operating income (loss) (84) 3,088 1,704 Net income (888)
2,306 1,076 Diluted EPS (0.04) 0.04 0.02 Add: Compensation expenses
for stock options 325 128 389 Amortization of discount on
conversion feature of convertible notes 623 --- --- Non-GAAP
operating income (1) 241 3,216 2,093 Non-GAAP net income (1) 61
2,434 1,465 Non-GAAP diluted EPS (1) 0.00 0.04 0.03 (1) CREG
provides operating income, net income and earnings per share on a
non-GAAP basis that excludes non-cash, share-based compensation
expense and non-cash interest expense on the amortization of the
beneficial conversion feature for the convertible notes, as
described below, to enable investors to better assess the Company's
operating performance. The non-GAAP measures are described below
and reconciled to the corresponding GAAP measure in the section
below titled "About Non-GAAP Financial Measures." First Quarter
2009 Financial Results For the first quarter of 2009, CREG
generated revenue of $4.3 million, compared with $12.3 million in
the fourth quarter of 2008 and zero in the first quarter of 2008.
Rental income from operational leases of industrial plants in China
contributed the entire amount of the revenue in the first quarter
of 2009, compared with 34.8% in the fourth quarter of 2008. Product
sales accounted 65.2% of the revenue in the fourth quarter of 2008.
Gross profit was $1.3 million, compared with $3.1 million in the
fourth quarter of 2008 and zero in the first quarter of 2008. Gross
margin was 30.2%, vs. 25.5% in the fourth quarter of 2008. The
improvement in gross margin was primarily because of higher
profitability of operational rental business compared with straight
product sales, which CREG did not record any in first quarter 2009.
Interest income from sales-type leases was $1.2 million, or 110.7%
higher than $569,038 in the fourth quarter of 2008 and 112.2%
higher than $564,952 for the first quarter of 2008. The increase
was primarily due to the inception of one more sales-type lease in
December 2008 starting generating interest income this year.
General and administrative expenses were $795,438, compared with
$630,974 in the fourth quarter of 2008 and $648,610 in the first
quarter of 2008. The increase was primarily because of the variable
fair value of the stock options to employees, and increased
payroll, marketing and traveling expense due to the expansion of
our business, as well as general costs of maintaining the status of
a public company. Non-GAAP operating income, as defined below, was
$2.1 million, compared with $3.3 million in the fourth quarter of
2008. GAAP operating income was $1.7 million, compared with $3.1
million in the fourth quarter of 2008 and an operating loss of
$83,658 in the first quarter of 2008. Non-GAAP net income was $1.5
million, compared with $2.4 million in the fourth quarter of 2008.
Non-GAAP diluted EPS was $0.03, compared with $0.04 in the fourth
quarter of 2008. GAAP net income was $1.1 million, compared with
$2.3 million in the fourth quarter of 2008 and a net loss of
$887,940 in the first quarter of 2008. GAAP diluted EPS was $0.02,
compared with $0.04 in the fourth quarter of 2008 and diluted loss
per share of $0.03 in the first quarter of 2008. As of March 31,
2009, cash and cash equivalents were $10.2 million, compared with
$7.3 million at year-end 2008. Total investments in sales-type
leases were $16.4 million, compared with $16.8 million as of the
end of 2008. Net working capital increased to $14.7 million, from
$11.3 million at December 31, 2008. Total shareholders' equity was
$33.0 million, compared with $32.4 million at December 31, 2008.
Net cash provided by operating activities was $4.4 million in the
first quarter of 2009, compared with net cash outflow from
operations of $279,044 in the same period of 2008. Recent
Developments On April 29, 2009, CREG issued an 8% Secured
Convertible Promissory Note in the principal amount of $3 million
to Carlyle Asia Growth Partners and CAGP III Co-Investment
("Carlyle Asia"). In addition, the Company amended and restated the
5% Secured Convertible Promissory Note in the principal amount of
$5 million previously issued to Carlyle Asia in April 2008. On
April 20, 2009, the Company entered into a Stock Purchase Agreement
with an accredited private investor. Pursuant to the agreements,
CREG issued approximately 2.4 million shares, with one-year lock-up
period not to sell, for an aggregate purchase price of $2 million,
or $0.85 per share. On April 13, 2009, the Company's wholly owned
subsidiary, Xi'an TCH Energy Technology Co., Ltd., entered into a
one-year working capital loan agreement with the Industrial Bank
Co., Ltd.'s Xi'an branch, to borrow $2.9 million (RMB 20 million)
at an interest rate of 5.3%. The loan agreement contains standard
representations, warranties and covenants. CREG intends to use the
net proceeds from the aforementioned transactions to cover capital
expenditures for its operations in China and other working capital
needs. Business Outlook CREG reaffirms revenues for 2009 to be in
the range of $33 million to $36 million, with net income, excluding
non-cash charges, of approximately $8 million. These targets are
based on the Company's current views on the operating and market
conditions, which are subject to change. Conference Call The
Company will host a conference call on Friday, May 15, 2009, at
8:30 a.m. Eastern Daylight Time / 8:30 p.m. Beijing Time.
Interested parties may participate in the conference call by
dialing +1-877-407-0782 (North America) or +1-201-689-8567
(International) 10 minutes before the call start time. A replay of
the call will be available through May 22, 2009, at 11:59 p.m.
Eastern Daylight Time. Interested parties may access the replay by
dialing +1-877-660-6853 (North America) or + 1-201-612-7415
(International) and entering account number: 286 and conference ID
number: 323311. About Non-GAAP Financial Measures This press
release contains non-GAAP financial measures for earnings that
exclude the effect of non-cash, non-operating expenses related to
the Convertible Notes issued in November 2007 and April 2008,
respectively, as well as the compensation expenses for the fair
value of stock options. China Recycling Energy Corp. uses non-GAAP
financial measures when it internally evaluates the performance of
business and makes operating decisions, including internal
budgeting and performance measurement. The Company believes that
providing the non-GAAP measures is useful to investors for a number
of reasons. The non-GAAP measures provide a consistent basis for
investors to understand the CREG's financial performance in
comparison to historical periods, and it allows investors to
evaluate CREG's performance using the same methodology and
information as that used by the Company's management. However,
investors need to be aware that non-GAAP measures are subject to
inherent limitations because they do not include all of the
expenses included under GAAP and they involve the exercise of
judgment of which charges are excluded from the non-GAAP financial
measure. About China Recycling Energy Corp. China Recycling Energy
Corp. (OTC:CREG) (BULLETIN BOARD: CREG) ("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 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. CHINA
RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEET AS OF AS OF MARCH 31, DECEMBER 31, 2009 2008 (UNAUDITED)
ASSETS CURRENT ASSETS Cash & cash equivalents $ 10,212,758 $
7,267,344 Investment in sales type leases, net 2,152,977 1,970,591
Interest receivable on sales type leases 237,033 82,406 Advance to
suppliers 73,156 -- Prepaid expenses 1,049,381 3,849,087 Other
receivables 121,885 102,850 Inventory 13,101,420 10,534,633
Deferred tax asset 14,032 -- Total current assets 26,962,642
23,806,911 NON-CURRENT ASSETS Investment in sales type leases, net
14,285,747 14,837,879 Advance for equipment -- 2,642,889 Property
and equipment, net 90,026 95,359 Construction in progress 5,193,171
3,731,016 Intangible assets, net 3,293 3,482 Total non-current
assets 19,572,237 21,310,625 TOTAL ASSETS 46,534,879 45,117,536
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable 1,184,716 1,186,902 Unearned revenues 658,289 658,415 Tax
payable 1,058,328 2,137,356 Accrued liabilities and other payables
3,583,069 3,528,527 Stock option liability 827,965 -- Convertible
notes, net of discount due to beneficial conversion feature
5,000,000 5,000,000 Total current liabilities 12,312,367 12,511,200
DEFERRED TAX LIABILITY 945,761 -- ACCRUED INTEREST ON CONVERTIBLE
NOTES 231,507 168,494 CONTINGENCIES AND COMMITMENTS STOCKHOLDERS'
EQUITY Common stock, $0.001 par value; 100,000,000 shares
authorized, 36,425,094 and 36,425,094 shares issued and outstanding
as of March 31, 2009 and December 31, 2008, respectively 36,425
36,425 Additional paid in capital 30,251,597 30,475,360 Unamortized
compensation expense, net (1,454,954) -- Statutory reserve
1,489,719 1,319,286 Accumulated other comprehensive income
3,552,692 3,582,587 Accumulated deficit (846,451) (2,991,995) Total
Company stockholders' equity 33,029,028 32,421,663 Noncontrolling
interest 16,216 16,179 Total equity 33,045,244 32,437,842 TOTAL
LIABILITIES AND EQUITY 46,534,879 45,117,536 CHINA RECYCLING ENERGY
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2009 2008 Revenue
Rental income $ 4,322,893 $ -- Total revenue 4,322,893 -- Cost of
sales Rental expense 3,021,673 -- Total cost of sales 3,021,673 --
Gross profit 1,301,220 -- Interest income on sales-type leases
1,198,531 564,952 Total operating income 2,499,751 564,952
Operating expenses General and administrative expenses 795,438
648,610 Total operating expenses 795,438 648,610 Income (loss) from
operations 1,704,313 (83,658) Non-operating income (expenses)
Interest income 5,013 -- Interest expense on convertible note
(63,232) (743,278) Financial expense (2,094) (422) Other income --
1,581 Exchange loss -- (11,189) Total non-operating expenses
(60,313) (753,308) Income (loss) before income tax 1,644,000
(836,966) Income tax expense 568,111 50,947 Net income (loss) from
operations 1,075,889 (887,913) Less: Net income attributable to
noncontrolling interest 40 27 Net income (loss) 1,075,849 (887,940)
Other comprehensive item Foreign currency translation gain (loss)
(29,895) 74,725 Comprehensive income (loss) 1,045,954 (813,215)
Basic weighted average shares outstanding 36,425,094 25,015,089
Diluted weighted average shares outstanding 46,760,632 30,508,410
Basic net earnings per share 0.03 (0.04) Diluted net earnings per
share 0.02 (0.04) * Interest expense on convertible notes are added
back to net income for the computation of diluted EPS. * Diluted
weighted average shares outstanding includes estimated shares will
be converted from the Second Note issued on April 29, 2008 with
conversion price contingent upon future net profits. * Basic and
diluted loss per share is the same due to anti-dilutive feature of
the securities. CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE
MONTHS ENDED MARCH 31, 2009 2008 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) including noncontrolling interest $
1,075,889 $ (887,913) Adjustments to reconcile net income (loss)
including noncontrolling interest to net cash provided by (used in)
operating activities: Depreciation and amortization 7,348 17
Amortization of discount related to conversion feature of
convertible note -- 623,288 Stock option compensation expense
389,376 325,155 Accrued interest on convertible notes 63,013
124,658 Changes in deferred tax 931,756 -- (Increase) decrease in
current assets: Interest receivable on sales type leases 211,913
(94,903) Advance to suppliers and prepaid expenses 2,799,495
(192,463) Other receivables (19,053) 1,622 Increase (decrease) in
current liabilities: Accounts payable (1,960) (69,737) Tax payable
(1,078,653) (125,995) Accrued liabilities and other payables 55,144
17,227 Net cash provided by (used in) operating activities
4,434,268 (279,044) CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in sales type leases -- 282,188 Acquisition of property
& equipment (1,843) (80,823) Construction in progress
(1,462,908) (977,299) Net cash used in investing activities
(1,464,751) (775,934) CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment to management -- (72,826) Advance from shareholder --
250,000 Net cash provided by financing activities -- 177,174 EFFECT
OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS (24,103)
41,065 NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
2,945,414 (836,739) CASH & CASH EQUIVALENTS, BEGINNING OF
PERIOD 7,267,344 1,634,340 CASH & CASH EQUIVALENTS, END OF
PERIOD 10,212,758 797,601 Supplemental Cash flow data: Income tax
paid 732,561 127,336 Interest paid -- -- For more information,
please contact: In China: China Recycling Energy Corp. Mr. Leo Wu
Investor Relations Email: In the U.S.: Grayling Mr. Valentine Ding
Investor Relations Tel: +1-646-284-9412 Email: DATASOURCE: China
Recycling Energy Corp. CONTACT: China Recycling Energy Corp., Mr.
Leo Wu, Investor Relations, or Grayling, Mr. Valentine Ding,
Investor Relations, +1-646- 284-9412, for China Recycling Energy
Corp. Web site: http://www.creg-cn.com/
Copyright