China Recycling Energy Corporation 2013 Second Quarter Financial Results

XI'AN, China, Aug 14, 2013 /PRNewswire-FirstCall/ -- China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its financial results for the 2013 Second quarter ended June 30, 2013.

Second Quarter 2013 Financial Highlights (Comparison data is for the same period Year-over-Year)

• Total sales was $13.91 million, an increase of 13.51 million as compared to $0.4 million;
• Income from operations was $7.5 million, increased 74.2% as compared to income from operations of $4.3 million;
• The net income increased 205% to  $3.7 million from $1.2 million;
• Fully diluted EPS of $0.07, as compared to $0.03;
• Completion and Delivery of Datong Phase I 6MW BPRT Systems.

Summary of Financial Results:

Mr. Guohua Ku, Chairman and Chief Executive Officer of China Recycling Energy, discussed quarterly financial results, current projects and the company's growth potential, "The second quarter 2013 showed significant increase in system sales and income as compared to last year's second quarter. The increase in system sales was anticipated since we have Datong Phase I project – two 3 MW BPRT power generation system completed during the second quarter.

Mr. Ku continued, "In terms of projects under construction, currently we have two projects,  Shanxi Datong Coal Group Power Generation Project and Jilin Ferroalloys Power Generation Project, with a total capacity of 33.5 megawatts. The company expects to complete the Shanxi Datong Phase II project by the end of 2013. As for Jilin Ferroalloys Project, it is scheduled to be completed by the end of third quarter of 2013."

"Recently we established an energy recycling fund to invest in coke dry quenching (CDQ) energy recovery and waste heat power generation projects with Hongyuan Huifu Venture Capital Co., Ltd. This fund can provide additional finance to our new projects and improve our competitiveness in energy recycling business." Mr. Ku continued, "Therefore, we are confident that CREG will gain a lead position in CDQ market in China and achieve great success in recycling energy industry."

Financial Results for Three Months Ended June 30, 2013

Total sales, including system sales and contingent rental income, for the three months ended June 30, 2013 was $13.91 million while total sales for the comparable period of 2012 was $0.40 million, an increase of $13.51 million as a result of increases in the sales of systems. Of the total sales, sales of systems for the three months ended June 30, 2013 was $13.62 million, as compared to $0 million for the comparable period of 2012, an increase of $13.62 million. For the three months ended June 30, 2013, Shanxi Datong Phase I project - two 3MW BPRT power generation systems were completed and sold. In comparison, in the same period of 2012, none of the Company's power generation system were completed and sold. For the three months ended June 30, 2013, the Company received contingent rental income of $0.29 million from the usage of electricity in addition to the minimum lease payments, compared to $0.40 million for the comparable period in 2012. For the sales-type lease, sales and cost of sales ("COS") are recorded at the time of leases; interest income from the sales-type leases is our other major revenue source in addition to sales revenue.

Cost of sales for the three months ended June 30, 2013 was $10.50 million while our COS for the comparable period of 2012 was $28,568,an increase of $10.48 million. This increase was mainly due to the completion and sale of the Shanxi Datong Phase I project.

Gross profit was $3.41 million for the three months ended June 30, 2013 compared to $0.37 million for the comparable period of 2012, a blended gross margin of 25% and 93% for the comparable periods of 2013 and 2012, respectively, the decreased profit margin in the three months ended June 30, 2013 was mainly due to comparison with the absence of systems sales and systems cost in the previous year corresponding quarter.

Interest income on sales-type leases for the three months ended June 30, 2013 was $4.73 million, a $0.02 million increase from $4.71 million for the comparable period of 2012. During the second quarter of 2013, interest income was derived from 12 systems: one TRT system, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, the Pucheng biomass power generation system, two Shenqiu biomass power generation systems and Zhongbao WHPG system. The Company sold Shanxi Datong Phase I project – two 3MW BPRT power generation systems in June 2013 and started collecting payments in July. In comparison, during the second quarter of 2012, interest income was derived from 11 systems: one TRT systems, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, the Pucheng biomass power generation system, Shenqiu biomass power generation system and Zhongbao WHPG system.

Operating expenses consisted of selling, general and administrative expenses totaling $0.68 million for the three months ended June 30, 2013 as compared to $0.81 million for the comparable period of 2012, a decrease of $0.13 million or 16%. This was mainly due to a decrease of $0.09 million expense for stock option compensation and $0.04 million for consulting and IR service.

Our net income for the three months ended June 30, 2013 was $3.73 million compared to $1.22 million for the comparable period of 2012, an increase of $2.51 million. This increase in net income was mainly due to the increased system sales, interest income on sales-type lease, and decreased non-operating expenses compared with the same period of 2012.

For the three months ended June 30, 2013, GAAP diluted EPS was $0.07 with approximately 50,770,461 shares of common stock outstanding, as compared with $0.03 in the same period of 2012 when the Company had 51,379,091 million shares of common stock outstanding.

As of June 30, 2013, the Company had cash and cash equivalents of $32.63 million, other current assets were $14.8 million and current liabilities were $62.53 million. Total shareholders' equity was $127.33 million, as compared with $119.36 million as of December 31, 2012.

Net Investment in Sales-Type Leases as of June 30, 2013 

Under sales-type leases, Xi'an TCH leased TRT systems to Zhangzhi with terms of 5 and 13 years, respectively; and leased CHPG systems to Tong Chuan Shengwei, and Jing Yang Shengwei respectively for 5 years, BMPG systems to Pucheng for 15 years, BMPG systems to Shenqiu Phase I for 11 years, Shenqiu Phase II for 9.5 years, a power and steam generating system from waste heat from metal refining to Erdos (five projects) for 20 years, and Datong 2 BPRT systems for 30 years.  

The components of the net investment in sales-type leases as of June 30, 2013 and December 31, 2012 are as follows:

As of June 30, 2013, the future minimum rentals to be received on non-cancelable sales-type leases by years are as follows: 

Non-GAAP Financial Measures

For the 2013 second quarter, Non-GAAP net income was $4.4 million, as compared with $4.05 million in the 2013 first quarter and $2.23 million in the 2012 second quarter.

The Company believes that "adjusted net income" and "adjusted earnings per share" information, when taken in conjunction with reported results, provide a useful measure of financial performance since they eliminate the impact of certain non-recurring, non-cash charges. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Additionally, the non-GAAP financial measures used by CREG may not be comparable to non-GAAP financial measures used by other companies.

Financial Results Conference Call

The Company will host a conference call at 9:30 a.m. EST on Friday, August 16, 2013, to discuss the Company's second quarter 2013 financial results. Mr. Guohua Ku, Chief Executive Officer, and Mr. David Chong, Chief Financial Officer, will be hosting the call.

Investors are invited to participate on the live call by dialing 1-800-860-2442 for domestic investors. International investors can dial 1-412-858-4600.  

If you are unable to participate in the call at this time, a replay of the call will be available for one hour following the call starting at 10:30 a.m. ET, August 16, 2013 and ending at 9:00 a.m. ET on August 26, 2013. To listen to the replay, domestic investors can dial +1-877-344-7529 and International investors can dial +1-412-317-0088.  The conference number for the replay is: 10032893.

For more information regarding China Recycling Energy Corp.'s financial performance during the quarter ended June 30, 2013, please refer to the Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on Aug 14, 2013.

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 April 2008, and the compensation expenses for the fair value of stock options, as well as deferred income tax expenses. The Company uses non-GAAP financial measures when it internally evaluates the performance of its 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 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. (NASDAQ: 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 percent 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:

Mr. David Chong, Chief Financial Officer
China Recycling Energy Corp.
Tel:   +86-1370-1813139
Email: chongscd@creg-cn.com

SOURCE China Recycling Energy Corp.