China Natural Gas Announces Third Quarter 2012 Financial Results
XI'AN, China, Nov. 9, 2012 /PRNewswire/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (PINK: CHNG), a leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, today announced its financial results for the third quarter ended September 30, 2012.
Shuwen Kang, CEO of China Natural Gas, Inc. commented: "We are pleased to share the results of our third quarter. The company has successfully commenced commercial production of its Jingbian liquefied natural gas ("LNG") plant on July 16, 2011, which represents a key milestone in its corporate history.
Our network of compressed natural gas, or CNG, fueling stations currently contains 32 stations, a significant presence in the markets we operate in. Our outlook for the forthcoming quarter of the year is promising as we continue to grow our business, and we look forward to sharing any future developments as they materialize."
Third Quarter 2012 Financial and Operating Results
Revenues in the third quarter of 2012 decreased by 15.8% to $31.06 million from $36.90 million in the third quarter of 2011,the decrease was primarily attributable to the sales volume decrease.Natural gas sales decreased 13.4% year-over-year to $27.90 million, compared to $32.23 million in the third quarter of 2011. Gasoline revenues in the third quarter of 2012 decreased to $0.65 million, down by 57.1% from $1.51 million in the same period of the prior year, which was mainly attributable to the closure of two gasoline fueling stations during the fourth quarter of 2011. Installation and services revenue decreased by 20.6% year-over-year to $2.51 million, compared to $3.16 million in the comparable period of 2011. In the third quarter of 2012, sales of natural gas, gasoline, and installation and other services contributed 89.8%, 2.1%, and 8.1% of the total revenues, respectively.
Gross profit in the third quarter of 2012 decreased 26.1% to $10.48 million, compared to $14.18 million in the same period of the prior year. Gross margin in the third quarter of 2012 was 33.7%, compared to 38.4% a year ago. Gross margin decreased primarily due to the current lower gross margin level of our LNG business, as compared to the gross margins of those business lines making greatest contribution to revenue.
Operating income in the third quarter of 2012 was $2.72 million, a decrease of 61.1% year-over-year from $7.00 million in the third quarter of 2011, primarily attributable to the decrease in gross profit of natural gas and increase in selling expenses.
Income tax expense was $0.09 million, as compared to $1.53 million in the third quarter of 2011.
Net loss in the third quarter of 2012 was $1.50 million, or $0.07 per diluted share, compared to net income of $4.55 million, or $0.21 per diluted share, in the third quarter of 2011, primarily attributable to the increase in non-operating expense related to the loss of $4.02 million on disposal of five fueling stations during the third quarter of 2012.
As of September 30, 2012, the Company had $8.60 million in cash and cash equivalents, compared to $9.62 million in cash and cash equivalents at December 31, 2011. The decrease was primarily attributable to the construction of the LNG plant and other projects, and the repayment of the loans from SPDB and of the principal of the Abax Senior Notes.
Net cash provided by operating activities was $21.08 million for the nine months ended September 30, 2012, compared to net cash provided by operations of $15.75 million for the nine months ended September 30, 2011. The increase was primarily due to the decrease in prepaid expense and other current assets, increase in unearned revenue and decrease in accounts receivable.
About China Natural Gas, Inc.
China Natural Gas (http://www.naturalgaschina.com) transports and sells natural gas to vehicular fueling terminals, as well as commercial, industrial and residential customers through its distribution networks in China's Shaanxi, Henan and Hubei Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 21 CNG fueling stations in Shaanxi Province 10 CNG fueling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; (2) the installation, distribution and sale of piped natural gas to residential, commercial and industrial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) the distribution and sale of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division.
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. For example, statements about the future plans and goals of the JV with CNPC and its prospects are forward looking and subject to risks. China Natural Gas, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statements on Forms S-1 and S-3, in each case as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.
| China Natural Gas, Inc. |
| Consolidated Balance Sheets |
| As of September 30, 2012 and December 31, 2011 |
| (Stated in US Dollars) |
| September 30, |
December 31, |
|||||||
| 2012 |
2011 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ |
8,604,906 |
$ |
9,622,883 |
||||
| Restricted cash |
739,150 |
- |
||||||
| Accounts receivable, net |
2,064,413 |
2,997,845 |
||||||
| Other receivables, net |
93,453 |
540,646 |
||||||
| Employee advances |
812,524 |
285,270 |
||||||
| Inventories |
3,685,266 |
1,938,754 |
||||||
| Advances to suppliers |
6,467,436 |
4,540,139 |
||||||
| Prepaid expense and other current assets |
4,367,024 |
4,470,687 |
||||||
| Total current assets |
26,834,172 |
24,396,224 |
||||||
| Investment in unconsolidated joint ventures |
1,583,000 |
1,574,000 |
||||||
| Property and equipment, net |
179,374,098 |
174,097,754 |
||||||
| Construction in progress |
51,567,976 |
45,882,320 |
||||||
| Deferred financing cost, net |
- |
517,334 |
||||||
| Goodwill |
1,741,678 |
629,729 |
||||||
| Other intangible assets |
20,366,045 |
18,910,244 |
||||||
| Prepaid expenses and other assets |
6,415,166 |
10,976,203 |
||||||
| TOTAL ASSETS |
$ |
287,882,135 |
$ |
276,983,808 |
||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Senior notes- current maturities |
$ |
38,255,832 |
$ |
9,671,682 |
||||
| Current portion of bank loan payable |
5,540,500 |
4,722,000 |
||||||
| Redeemable liabilities - warrants |
17,500,000 |
- |
||||||
| Accounts payable and accrued liabilities |
8,203,277 |
7,694,423 |
||||||
| Other payable - related party |
1,612,355 |
787,000 |
||||||
| Short-term borrowing - related party |
2,679,945 |
1,359,945 |
||||||
| Unearned revenue |
5,479,768 |
4,280,594 |
||||||
| Accrued interest |
1,470,269 |
1,029,431 |
||||||
| Taxes payable |
1,210,929 |
2,626,271 |
||||||
| Total current liabilities |
81,952,875 |
32,171,346 |
||||||
| LONG-TERM LIABILITIES: |
||||||||
| Senior notes, net of current portion |
- |
25,791,151 |
||||||
| Bank loan payable, net of current portion |
7,915,000 |
9,444,000 |
||||||
| Borrowings - related party |
- |
1,320,000 |
||||||
| Warrants liability |
- |
17,500,000 |
||||||
| Total long-term liabilities |
7,915,000 |
54,055,151 |
||||||
| Total liabilities |
$ |
89,867,875 |
$ |
86,226,497 |
||||
| STOCKHOLDERS' EQUITY: |
||||||||
| Preferred stock, par value $0.0001 per share, 5,000,000 authorized, none issued and outstanding |
$ |
- |
$ |
- |
||||
| Common stock, par value $0.0001 per share, 45,000,000 authorized, 21,458,654 issued and outstanding at September 30, 2012 and December 31, 2011 |
2,145 |
2,145 |
||||||
| Additional paid-in capital |
83,353,599 |
82,909,485 |
||||||
| Accumulated other comprehensive income |
20,713,885 |
19,817,493 |
||||||
| Statutory reserves |
11,051,811 |
10,124,710 |
||||||
| Retained earnings |
82,674,291 |
77,903,478 |
||||||
| Noncontrolling interests |
218,529 |
- |
||||||
| Total stockholders' equity |
198,014,260 |
190,757,311 |
||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
287,882,135 |
$ |
276,983,808 |
||||
| China Natural Gas, Inc. |
| Consolidated Statements of Income and Comprehensive Income |
| For the three months and nine months periods ended September 30, 2012 and 2011 |
| (Stated in US Dollars) |
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2012 |
2011 |
2012 |
2011 |
|||||||||||||
| Revenues |
||||||||||||||||
| Natural gas |
$ |
27,903,522 |
$ |
32,225,481 |
$ |
92,231,013 |
$ |
74,859,041 |
||||||||
| Gasoline |
647,061 |
1,508,657 |
2,174,124 |
4,790,207 |
||||||||||||
| Installation and others |
2,511,199 |
3,163,237 |
6,835,658 |
8,669,404 |
||||||||||||
| 31,061,782 |
36,897,375 |
101,240,795 |
88,318,652 |
|||||||||||||
| Cost of revenues |
||||||||||||||||
| Natural gas |
18,950,048 |
19,893,643 |
60,687,423 |
44,863,543 |
||||||||||||
| Gasoline |
616,290 |
1,461,302 |
2,060,048 |
4,588,735 |
||||||||||||
| Installation and others |
1,013,647 |
1,363,506 |
2,821,175 |
3,736,054 |
||||||||||||
| 20,579,985 |
22,718,451 |
65,568,646 |
53,188,332 |
|||||||||||||
| Gross profit |
10,481,797 |
14,178,924 |
35,672,149 |
35,130,320 |
||||||||||||
| Operating expenses |
||||||||||||||||
| Selling |
6,503,728 |
4,667,132 |
17,074,392 |
12,288,465 |
||||||||||||
| General and administrative |
1,255,336 |
2,513,296 |
5,603,011 |
7,276,052 |
||||||||||||
| 7,759,064 |
7,180,428 |
22,677,403 |
19,564,517 |
|||||||||||||
| Income from operations |
2,722,733 |
6,998,496 |
12,994,746 |
15,565,803 |
||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
22,084 |
12,403 |
42,683 |
28,323 |
||||||||||||
| Interest expense |
(277,347) |
(465,236) |
(985,027) |
(469,902) |
||||||||||||
| Loss on disposal of fixed assets |
(4,017,726) |
- |
(4,017,726) |
- |
||||||||||||
| Other income (expense), net |
133,625 |
(62,059) |
119,295 |
25,806 |
||||||||||||
| Change in fair value of warrants |
1,233 |
11,971 |
4 |
251,781 |
||||||||||||
| Foreign currency exchange loss |
2,634 |
(421,031) |
(501,812) |
(428,079) |
||||||||||||
| (4,135,497) |
(923,952) |
(5,342,583) |
(592,071) |
|||||||||||||
| Income before income tax |
(1,412,764) |
6,074,544 |
7,652,163 |
14,973,732 |
||||||||||||
| Provision for income tax |
87,239 |
1,529,451 |
2,129,838 |
3,549,122 |
||||||||||||
| Net income (loss) |
(1,500,003) |
4,545,093 |
5,522,325 |
11,424,610 |
||||||||||||
| Less: Income (loss) attributable to noncontrolling interests |
23,594 |
- |
(175,589) |
- |
||||||||||||
| Net income (loss) attributable to China Natural Gas, Inc. |
(1,523,597) |
4,545,093 |
5,697,914 |
11,424,610 |
||||||||||||
| Other comprehensive income (loss) |
||||||||||||||||
| Foreign currency translation gain |
(844,824) |
2,696,721 |
896,392 |
7,139,013 |
||||||||||||
| Comprehensive income (loss) |
$ |
(2,368,421) |
$ |
7,241,814 |
$ |
6,594,306 |
$ |
18,563,623 |
||||||||
| Weighted average shares outstanding |
||||||||||||||||
| Basic |
21,458,654 |
21,458,654 |
21,458,654 |
21,403,052 |
||||||||||||
| Diluted |
21,458,654 |
21,458,654 |
21,458,654 |
21,403,052 |
||||||||||||
| Earnings per share |
||||||||||||||||
| Basic |
$ |
(0.07) |
$ |
0.21 |
$ |
0.27 |
$ |
0.53 |
||||||||
| Diluted |
$ |
(0.07) |
$ |
0.21 |
$ |
0.27 |
$ |
0.53 |
||||||||
| China Natural gas, Inc. |
| Consolidated Statements of Stockholders' Equity |
| As of September 30, 2012 and December 31, 2011 |
| (Stated in US Dollars) |
| Common Stock |
Additional |
Accumulative |
Retained Earnings |
Total |
||||||||||||||||||||||||||||
| Shares |
Amount |
Paid-in |
Comprehensive |
Minority |
Statutory |
Unrestricted |
Stockholders' |
|||||||||||||||||||||||||
| Balance at 1/1/2011 |
21,321,904 |
$ |
2,132 |
$ |
81,611,763 |
$ |
15,667,145 |
$ |
- |
$ |
7,918,634 |
$ |
64,847,622 |
$ |
170,047,296 |
|||||||||||||||||
| Exercise of stock options |
136,750 |
13 |
670,062 |
- |
- |
- |
- |
670,075 |
||||||||||||||||||||||||
| Stock based compensation |
- |
- |
627,660 |
- |
- |
- |
- |
627,660 |
||||||||||||||||||||||||
| Cumulative translation adjustment |
- |
- |
- |
4,150,348 |
- |
- |
- |
4,150,348 |
||||||||||||||||||||||||
| Net income |
- |
- |
- |
- |
- |
- |
15,261,932 |
15,261,932 |
||||||||||||||||||||||||
| Appropriation of retain earnings |
- |
- |
- |
- |
- |
2,206,076 |
(2,206,076) |
- |
||||||||||||||||||||||||
| Balance at 12/31/2011 |
21,458,654 |
$ |
2,145 |
$ |
82,909,485 |
$ |
19,817,493 |
$ |
- |
$ |
10,124,710 |
$ |
77,903,478 |
$ |
190,757,311 |
|||||||||||||||||
| Balance at 1/1/2012 |
21,458,654 |
$ |
2,145 |
$ |
82,909,485 |
$ |
19,817,493 |
$ |
- |
$ |
10,124,710 |
$ |
77,903,478 |
$ |
190,757,311 |
|||||||||||||||||
| Stock based compensation |
- |
- |
444,114 |
- |
- |
- |
- |
444,114 |
||||||||||||||||||||||||
| Purchases of a Noncontrolling interest equity |
- |
- |
- |
- |
394,118 |
- |
- |
394,118 |
||||||||||||||||||||||||
| Cumulative translation adjustment |
- |
- |
- |
896,392 |
- |
- |
- |
896,392 |
||||||||||||||||||||||||
| Net income |
- |
- |
- |
- |
(175,589) |
- |
5,697,914 |
5,522,325 |
||||||||||||||||||||||||
| Appropriation of retain earnings |
- |
- |
- |
- |
- |
927,101 |
(927,101) |
- |
||||||||||||||||||||||||
| Balance at 9/30/2012 |
21,458,654 |
$ |
2,145 |
$ |
83,353,599 |
$ |
20,713,885 |
$ |
218,529 |
$ |
11,051,811 |
$ |
82,674,291 |
$ |
198,014,260 |
|||||||||||||||||
| China Natural gas, Inc. |
| Consolidated Statements of Cash Flows |
| For the nine months periods ended September 30, 2012 and 2011 |
| (Stated in US Dollars) |
| For the Nine Months Ended September 30, |
||||||||
| 2012 |
2011 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income attributable to China Natural Gas, Inc. |
$ |
5,697,914 |
$ |
11,424,610 |
||||
| Add: Loss attributable to noncontrolling interests |
(175,589) |
- |
||||||
| Net income |
5,522,325 |
11,424,610 |
||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
10,443,635 |
6,271,846 |
||||||
| Provision for doubtful accounts |
200,984 |
6,759 |
||||||
| Loss (Gain) on disposal of fixed assets |
4,017,726 |
(3,366) |
||||||
| Stock-based compensation |
444,114 |
479,622 |
||||||
| Change in fair value of warrants |
(4) |
(251,781) |
||||||
| Change in assets and liabilities: |
||||||||
| Accounts receivable |
1,067,790 |
(148,404) |
||||||
| Other receivables |
170,241 |
(339,992) |
||||||
| Employee advances |
(526,366) |
24,019 |
||||||
| Inventories |
(1,365,120) |
(1,011,663) |
||||||
| Advances to suppliers |
(2,458,489) |
(5,863,429) |
||||||
| Prepaid expense and other current assets |
3,049,626 |
(313,404) |
||||||
| Accounts payable and accrued liabilities |
325,648 |
1,953,199 |
||||||
| Unearned revenue |
1,176,182 |
3,171,096 |
||||||
| Accrued interest |
440,838 |
(114,033) |
||||||
| Taxes payable |
(1,432,165) |
461,903 |
||||||
| Net cash provided by operating activities |
21,076,965 |
15,746,982 |
||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Payment for acquisition of property and equipment |
(4,129,677) |
(6,568,845) |
||||||
| Proceeds from sales of property and equipment |
2,850,914 |
16,896 |
||||||
| Additions to construction in progress |
(13,107,944) |
(7,884,773) |
||||||
| Prepayment on long-term assets |
(418,295) |
(805,522) |
||||||
| Payment for acquisition of business |
(656,179) |
- |
||||||
| Payment for intangible assets |
(1,768,049) |
(189,327) |
||||||
| Net cash used in investing activities |
(17,229,230) |
(15,431,571) |
||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from exercise of stock options |
- |
670,075 |
||||||
| Proceeds from short-term debt and other payable, related parties |
- |
3,090,647 |
||||||
| Repayment of long-term debt |
(792,500) |
- |
||||||
| Repayment of senior notes |
(3,333,334) |
(3,333,334) |
||||||
| Increase in restricted cash |
(740,084) |
- |
||||||
| Net cash (used in) provided by financing activities |
(4,865,918) |
427,388 |
||||||
| Effect of exchange rate changes on cash and cash equivalents |
206 |
424,188 |
||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(1,017,977) |
1,166,987 |
||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
9,622,883 |
10,046,249 |
||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
8,604,906 |
$ |
11,213,236 |
||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
| Interest paid, net of capitalized interest |
$ |
718,541 |
$ |
293,941 |
||||
| Income taxes paid |
$ |
3,330,382 |
$ |
3,142,069 |
||||
| Non-cash transactions for investing and financing activities: |
||||||||
| Construction materials transferred to construction in progress |
$ |
67,058 |
$ |
6,210,629 |
||||
| Construction in progress transferred to property and equipment |
$ |
19,380,905 |
$ |
93,297,528 |
||||
| Construction in progress transferred to intangible assets |
$ |
- |
$ |
11,611,672 |
||||
| Advances to suppliers transferred to construction in progress |
$ |
- |
$ |
7,609,906 |
||||
| Other assets transferred to construction in progress |
$ |
2,577,107 |
$ |
2,342,356 |
||||
| Capitalized interest - amortization of discount of notes payable and issuance cost |
$ |
6,107,601 |
$ |
3,142,357 |
||||
| For more information, please contact:
|
|
| China Natural Gas, Inc. |
|
| Zhaoyang Qiao, CFO |
|
| Phone: +86-29-8832-7391 Cell: +86-158 2969-1287 |
|
| Email: [email protected] |
|
| Jackie Shi |
|
| Investor Relations Director |
|
| Phone: +86-29-8832-3325 x922 |
|
| Cell: +86-139-9287-9998 |
|
| Email: [email protected] |
|
SOURCE China Natural Gas, Inc.
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