Sino Clean Energy, Inc. Announces First Quarter 2010 Financial Results
XI'AN, China, May 18 /PRNewswire-Asia-FirstCall/ --
-- First Quarter 2010 revenue increased 215.1% to $24.5 million; adjusted
net income increased 241.6% to $4.9 million, with adjusted EPS of $0.33
-- Company reaffirmed 2010 revenue and adjusted net income of at least
$105 million and $25 million, respectively, representing an increase of
approximately 128.3% and 127.3% compared to 2009
-- Management to host Earnings Conference Call on Tuesday May 18, 2010 at
10:30 a.m. EDT
Sino Clean Energy, Inc. (OTC Bulletin Board: SCLX; "Sino Clean Energy," or the "Company"), a leading producer and distributor of coal-water slurry fuel ("CWSF") in the People's Republic of China ("China"), today announced the Company's financial results for the first quarter of 2010.
First Quarter Results (USD)
(three months ended March 31)
2010 2009 CHANGE
Revenue $24.5 million $7.8 million +215.1%
Gross Profit $10.1 million $2.4 million +316.0%
GAAP Net Income (Loss) $20.5 million $1.6 million +1,270%
Adjusted Net Income $4.9 million(1) $1.4 million(2) +241.6%
GAAP EPS (Diluted) $1.37 $0.17 +705.9%
Adjusted EPS (Diluted) $0.33(1) $0.15(2) +120.0%
(1) Excludes non-cash gain of $28.4 million related to extinguishment of
derivative liability, non-cash charges of $4.2 million for the changes
in fair value of warrants, and $8.6 million for amortization of notes
discount.
(2) Excludes non-cash gain of $0.6 million for the changes in fair value
of warrants, non-cash charges of $0.3 million for amortization of
notes discount, and $0.1 million related to the shares of common stock
placed in escrow in connection with the Company's September 2008
financing.
Please note: For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.
Revenue -- Revenue for the first quarter ended March 31, 2010 increased 215.1% to $24.5 million from $7.8 million in the first quarter of 2009. The significant increase is primarily attributable to increased production resulting from the addition in 2009 of two new production lines, which has led to an increase in sales from new and existing customers. The Company's annual production capacity at March 31, 2010 was 650,000 metric tons, reflecting the contribution of the new CWSF production lines which increased annual output capacity by 550,000 metric tons. As of March 31, 2010, Sino Clean Energy had 35 customers under CWSF supply agreements totaling approximately 800,000 metric tons per year, compared to 30 customers totaling approximately 600,000 metric tons of CWSF per year at December 31, 2009.
Cost of Goods Sold -- Cost of goods sold was $14.4 million for the first quarter of 2010, compared to $5.3 million for the first quarter of 2009, an increase of 169.3%, less than the increase in sales.
Gross Profit and Gross Profit Margin -- Gross profit increased 316.0% to $10.1 million in the first quarter of 2010 from $2.4 million in the first quarter of 2009, as gross profit margin improved to 41.2% from 31.2% as a result of better pricing for CWSF in Shenyang. As a result of the new production line added in 2009, depreciation of plant and machinery for the first quarter of 2010 was $0.5 million as compared to $0.4 million in the first quarter of 2009.
Operating Expenses -- Operating expenses for the first quarter of 2010 were approximately $1.6 million, up 195.1% from $0.6 million for the first quarter of 2009. Selling expenses totaled $0.9 million for the first quarter of 2010, as compared to $3,559 for the first quarter of 2009. The increase was mainly in transportation cost, which totaled $0.89 million, due to the growth of the Company's business in 2010. General and administrative expenses totaled $0.7 million for the first quarter of 2010, as compared to $0.5 million for the first quarter of 2009, an increase of 31.0% due primarily to the expansion of the Company's operations.
Income from Operations -- Income from operations in the first quarter of 2010 increased 220.6% to $8.5 million from $1.9 million in the same period in 2009, with operating margins of 30.8% compared to 31.0% in the respective periods.
Net Income -- For the first quarter of 2010, the Company reported net income of $20.4 million compared to net income of $1.6 million for the first quarter of 2009, with a corresponding net income per share of $1.37 compared to net income per share of $0.17 based on 14.9 million and 9.3 million diluted shares, respectively. The increase in net income for the first quarter of 2010 is primarily attributable to a gain on extinguishment of derivative liability, offset by charges for the change in the fair value of certain derivative liabilities and amortization of notes discount. Results for the first quarter of 2009 included charges related to the shares of common stock held by the Company's Chief Executive Officer and placed in escrow in connection with the Company's September 2008 financing transaction and to charges for amortization of notes discount, offset by a gain related to the change in the fair value of certain derivative liabilities. Excluding these items, adjusted net income for the first quarter of 2010 and 2009 would have been $4.9 million and $1.4 million, respectively, with corresponding adjusted net income per share of $0.33 and $0.15 based on 14.9 million and 9.3 million diluted shares, respectively. (See "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" table below.)
"We are pleased with our strong revenue growth and operating results during the first quarter of 2010, and expect robust growth to continue during 2010 due to our increased production capacity and growing demand for coal water slurry fuel in China," stated Baowen Ren, Chairman of Sino Clean Energy. "Our total production capacity today is 850,000 metric tons and we plan to expand our production capacity to 1,050,000 metric tons by the end of 2010. Currently, we have 35 customers under CWSF supply agreements totaling approximately 800,000 metric tons per year. The CWSF market continues to expand due to growing customer demand for clean and efficient sources of energy and the government's mandate for reduced emissions through improved utilization of coal. CWSF increases burning efficiency and reduces air pollution, coal consumption and coal material costs for end users while generating attractive gross profit margins for energy producers. As a result, we believe we are well-positioned to further drive incremental revenue and earnings growth and will continue to build upon being a leading producer of CWSF in China."
Liquidity and Capital Resources
Cash and cash equivalents were $25.8 million at March 31, 2010 compared to $18.3 million at December 31, 2009. For the first quarter of 2010, the Company generated $11.3 million in net cash flow from operations, compared to $2.4 million in the first quarter of 2009. The Company had working capital of $6.9 million at March 31, 2009 and a current ratio of 1.26-to-1. Inventories were $0.8 million and the accounts receivable balance was $2.8 million at March 31, 2010, compared to approximately $0.9 million and $3.7 million respectively at December 31, 2009. The annualized days sales outstanding for the first quarter of 2010 were 41 days.
Financial Outlook for 2010
For the year ending December 31, 2010, management reaffirmed guidance and expects revenues of at least $105 million in revenues and adjusted net income of at least $25 million, representing an increase of approximately 128.3% and 127.3% compared to 2009 revenues and adjusted net income, respectively. This guidance assumes total sales volume of 850,000 metric tons of CWSF in 2010. The Company expects to end 2010 with 1,050,000 metric tons of total CWSF production capacity.
Conference Call
The conference call will take place at 10:30 a.m. ET on Tuesday, May 18, 2010. Interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally.
A playback will be available through May 25, 2010. To listen, please call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4299949 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00007551 , or visiting ViaVid's website at http://www.viavid.net , where the webcast can be accessed through May 25, 2010.
About Sino Clean Energy
Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water slurry fuel ("CWSF"). With locations in Shaanxi Province and Liaoning Province, Sino Clean Energy is the largest CWSF producer in Northwestern China with 850,000 metric tons of total annual capacity. For more information about Sino Clean Energy, please visit http://www.sinocei.net/ .
About Non-GAAP Financial Measures
The following table excludes from net income (loss) certain items related to the cost of escrow shares put in escrow by the Company's chairman as a guarantee on the issuance of Sino Clean Energy's convertible notes, the change in fair value of the derivatives created upon issuance of the Company's private placement related to the conversion feature of the notes and the fair value during the period of the warrants issued to the convertible note holders, as well as the extinguishment of a portion of the derivative upon conversion of the notes, and amortization of the valuation discount recorded as interest expense relating to these convertible notes. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non- cash charges that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of Sino Clean Energy. Accordingly, management excludes these items when making operational decisions. The Company believes that providing to its investors the non-GAAP measures that management uses is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non- GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(Unaudited)
2010 2009
GAAP Net (loss) income $20,460,621 $1,562,160
Non-GAAP
Expense related to escrow
shares -- $120,167
Gain on extinguishment of
derivative liability $(28,404,181) --
Change in fair value of
derivative liabilities $4,239,929 $(578,978)
Amortization of notes
discount $8,601,975 $329,338
Adjusted Net income $4,894,334 $1,432,687
Safe Harbor Statement
This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to uncertainties in product demand, the impact of competitive products and pricing, our ability to obtain regulatory approvals, changing economic conditions around the world, release and sales of new products and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For further information please contact:
Company:
Ming Lee
Assistant to the Chairman
Tel: +86-29-8406-7376 (China)
Email: [email protected]
Investor Relations:
HC International, Inc.
Ted Haberfield
Executive VP
Tel: +1-760-755-2716
Email: [email protected]
Web: http://www.hcinternational.net
FINANCIAL TABLES FOLLOW
Sino Clean Energy Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, December 31,
ASSETS 2010 2009
Current assets (Unaudited)
Cash and cash equivalents $25,760,626 $18,302,558
Accounts receivable, net 2,791,092 3,655,473
Inventories 809,277 892,609
Prepaid inventories 4,254,320 5,453,095
Prepaid expenses 22,084 259,627
Tax recoverable -- 138,495
Other receivables 18,469 65,584
Land use right - current portion 38,750 38,739
Total current assets 33,694,618 28,806,180
Property, plant and equipment, net 15,634,747 12,557,691
Land use right - non current portion 1,769,369 1,778,562
Goodwill 762,018 762,018
Prepayments and deposits 1,228,390 729,328
Total assets $53,089,142 $44,633,779
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued expenses $3,605,237 $2,672,211
Taxes payable 2,132,203 1,577,249
Amount due to directors 73,466 73,466
Derivative liabilities 20,992,787 16,752,858
Total current liabilities 26,803,693 21,075,784
Convertible notes, net of discount -- 1,615,025
Derivative liabilities -- 28,404,181
Total liabilities 26,803,693 51,094,990
Commitments and Contingencies
Shareholders' Equity (Deficiency)
Preferred stock, $0.001 par value,
50,000,000 shares authorized, none
issued and outstanding -- --
Common stock, $0.001 par value,
30,000,000 shares authorized,
16,556,250 and 10,849,863 issued
and outstanding as of March 31, 2010
and December 31, 2009 respectively 16,557 10,850
Additional paid-in capital 37,700,930 25,432,804
Accumulated deficit (15,342,366) (35,802,987)
Statutory reserves 1,758,553 1,758,553
Accumulated other comprehensive income 2,151,775 2,139,569
Total Shareholders' equity (deficiency) 26,285,449 (6,461,211)
Total liabilities and shareholders' equity
(deficiency) $53,089,142 $44,633,779
Sino Clean Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Other Comprehensive Income
(Unaudited)
Three Months ended March 31,
2010 2009
Revenue $24,509,004 $7,778,277
Cost of goods sold (14,400,177) (5,348,107)
Gross profit 10,108,827 2,430,170
Selling expenses 911,079 3,559
General and administrative expenses 719,182 548,899
Income from operations 8,478,566 1,877,712
Other income (expense)
Interest and finance costs (10,444,563) (485,747)
Expense related to escrow shares -- (120,167)
Interest income 12,871 3,986
Change in fair value of derivative
liabilities (4,239,929) 578,978
Gain on extinguishment of
derivative liability 28,404,181 --
Total other income (expense) 13,732,560 (22,950)
Income before provision for income
taxes 22,211,126 1,854,762
Provision for income taxes 1,750,505 289,286
Net income 20,460,621 1,565,476
Other comprehensive income (loss)
Foreign currency translation
adjustment 12,206 (3,316)
Comprehensive income $20,472,827 $1,562,160
Weight average number of shares
-Basic 12,851,265 9,219,471
-Diluted 14,933,797 9,275,123
Income per common share
-Basic $1.59 $0.17
-Diluted $1.37 $0.17
Sino Clean Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2010
(Unaudited)
Additional
Common stock paid-in Statutory
Shares Amount capital reserves
Balance, January 1,
2010 10,849,863 $10,850 $25,432,804 $1,758,553
Shares issued for
exercise of warrants
and options 62,632 63 173,917 --
Fair value of options
granted -- -- 18,152 --
Shares issued upon
conversion of notes
payables 5,643,755 5,644 12,076,057 --
Net income -- -- -- --
Foreign currency
translation gain -- -- -- --
Balance, March 31,
2010 16,556,250 $16,557 $37,700,930 $1,758,553
Retained Accumulated
earnings other
(Accumulated comprehensive
Deficit) income Total
Balance, January 1, 2010 $(35,802,987) $2,139,569 $(6,461,211)
Shares issued for exercise
of warrants and options -- -- 173,980
Fair value of options
granted -- -- 18,152
Shares issued upon
conversion of notes
payables -- -- 12,081,701
Net income 20,460,621 -- 20,460,621
Foreign currency
translation gain -- 12,206 12,206
Balance, March 31, 2010 $(15,342,366) $2,151,775 $26,285,449
Sino Clean Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months ended March 31,
2010 2009
Cash flow from operating activities:
Net income $20,460,621 $1,565,476
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 469,002 356,063
Amortization of deferred debt
issuance costs -- 97,128
Amortization of discount on
convertible notes 8,601,975 329,338
Fair value of common stock issued
for payment of interest expense 1,864,701 --
Expense related to escrow shares -- 120,167
Fair value of common stock issued
for services -- 233,300
Fair value of vested options 18,152 --
Change in fair value of
derivative liabilities 4,239,929 (578,978)
Gain on extinguishment of
derivative liabilities (28,404,181) --
Change in operating assets and
liabilities:
Accounts receivable 864,382 (874,993)
Other receivables 47,115 820
Prepaid expenses 237,543 --
Inventories 83,332 (97,682)
Prepaid inventories 1,198,775 --
Tax recoverable 138,495 --
Accounts payable and accrued
expenses 933,026 178,809
Taxes payable 554,955 261,239
Net cash provided by operating
activities 11,307,822 1,590,687
Cash flows from investing activities:
Prepayments and deposits (499,062) 848,397
Purchase of property, plant and
equipment (3,532,523) --
Net cash used in investing
activities (4,031,585) 848,397
Cash flows from financing activities:
Payment of advances from director -- (394,956)
Cash received from exercise of
warrants and options 173,980 --
Net cash provided by (used in)
financing activities 173,980 (394,956)
Effect of foreign currency
translation 7,851 (523)
Net increase in cash and cash
equivalents 7,458,068 2,043,605
Cash and cash equivalents, beginning
of period 18,302,558 3,914,306
Cash and cash equivalents, end of
period $25,760,626 $5,957,911
Supplemental disclosure information
Interest paid $ -- $ --
Income taxes paid $1,616,656 $542,632
Supplemental non-cash investing and
financing activities
Issuance of shares upon conversion
of convertible notes $10,217,000 $ --
Issuance of shares to consultant $ -- $233,300
Cumulative effect of change in
accounting principle on convertible
notes and warrants $ -- $4,589,792
SOURCE Sino Clean Energy, Inc.
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