- Teleconference to Be Held Tuesday, March 24, 2009, at 8:30 a.m.
EDT - XI'AN, China, March 23 /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 financial results for the fourth
quarter and full year ended December 31, 2008. Highlights for
Fourth Quarter and Full Year 2008 -- Fourth quarter 2008 revenue
grew 189.7% quarter-over-quarter to $12.3 million -- Fourth quarter
2008 non-GAAP net income, as defined below, rose 189.9%
quarter-over-quarter to $2.4 million -- Full year 2008 revenue
increased 106.5% year-over-year to $19.2 million -- Full year 2008
non-GAAP net income, as defined below, increased 105%
year-over-year to $3.9 million -- The Company has now completed
three sales-type leases and two operational leases to receive
rental and interest incomes through electricity generation from
industrial waste heat and gas "I am pleased to see our timely
completion of the low-temperature waste-heat power generation
system for Shengwei Construction Materials Group Co., Ltd. in
Tongchuan City, Shaanxi Province," Mr. Guohua Ku, CEO of CREG,
said. "This is the first project for Shengwei that added product
sales revenue for us in the fourth quarter, as we had expected. It
also brought the total number of our completed projects to five,
including three sales-type leases and two operational leases. These
projects are spread out in China's steel, cement and chemical
industries, and will generate stable, recurring rental and interest
incomes for us for the next five to 13 years." Summary of Financial
Results (In '000s of U.S. FOR THE YEAR FOR THE THREE MONTHS ENDED
Dollars, except ENDED DEC. 31, DEC. 31, SEPT. 30, for per share
data) 2008 2007 2008 2008 Revenue $ 19,218 $ 9,302 $ 12,341 $ 4,260
Gross profit 5,216 2,269 3,150 1,282 Income before Tax (IBT) 3,466
2,316 3,143 1,160 Add: Amortization of discount related to
conversion feature of convertible note 1,212 315 -- -- Compensation
expenses for stock options 856 172 127 96 Non-GAAP IBT (1) 5,534
2,803 3,270 1,256 Net income 1,833 1,878 2,306 733 Non-GAAP net
income (1) 3,902 2,365 2,434 828 Diluted EPS 0.03 0.10 0.04 0.02
Non-GAAP diluted EPS (1) (2) 0.10 0.10 0.06 0.02 (1) CREG provides
income before tax, 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; (2) Non-GAAP diluted
weighted average shares outstanding were calculated based on
outstanding shares, issued options, and estimated shares under the
assumption that they would be converted from our convertible
debentures based on CREG's estimated 2009 earnings. Fourth Quarter
of 2008 For the fourth quarter of 2008, the Company generated
revenue of $12.3 million, compared with $226,348 in the fourth
quarter of 2007. Sequentially, revenue grew 189.7% from $4.3
million in the third quarter of 2008. The increase was primarily
because of the contribution from product sales. Product sales
contributed $8.0 million, or 65.2% of the total revenue, compared
with $226,348 in the fourth quarter of 2007 and zero in the third
quarter of 2008; rental income from operational leases at
industrial plants in China was $4.3 million, or 34.8% of the total
revenue, compared with zero in the fourth quarter of 2007 and $4.3
million in the third quarter of 2008. Gross profit was $3.1
million, compared with $174,485 in the fourth quarter of 2007 and
$1.3 million in the third quarter of 2008. Gross margin was 25.5%,
compared with 77.1% in the fourth quarter of 2007 and 30.1% in the
third quarter of 2008. The lower gross margin was primarily because
of higher costs of the sophisticated waste-to-electricity machinery
the Company procures to install and test for its customers.
Interest income from sales-type leases was $569,038, compared with
$542, 637 in the fourth quarter of 2007 and $576,817 in the third
quarter of 2008. General and administrative expenses were $630,974,
compared with $183,708 in the fourth quarter of 2007 and $638,949
in the third quarter of 2008. The increase over the same period of
2007 was primarily because of the 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
income before tax, as defined in the "Summary of Financial Results"
section, was $3.3 million, or 154% higher than $1.3 million in the
third quarter of 2008. GAAP income before tax was $3.1 million, or
158% higher than $1.2 million in the third quarter of 2008. The
Company's effective tax rate was 26.6%, compared with negative
65.7% in the fourth quarter of 2007 and 36.9% in the third quarter
of 2008. Non-GAAP net income was $2.4 million, compared with
$828,328 in the third quarter of 2008. Non-GAAP diluted EPS was
$0.06, compared with $0.02 in the third quarter of 2008. GAAP net
income was $2.3 million, compared with GAAP loss of $170,252 in the
fourth quarter of 2007 and GAAP net income of $732,512 in the third
quarter of 2008. GAAP diluted EPS was $0.04, compared with GAAP
diluted loss per share of $0.02 in the fourth quarter of 2007 and
GAAP diluted earnings per share of $0.02 in the third quarter of
2008. Full Year 2008 For the year 2008, revenue increased 106.5% to
$19.2 million, from $9.3 million in 2007. Product sales contributed
$8 million, or 41.9% of the total revenue, compared with $9.3
million in 2007, which consisted total revenue. Rental income
contributed $11.2 million, or 58.1% of the total revenue, compared
with zero in 2007. Gross profit rose 126.1% to $5.2 million, from
$2.3 million in 2007. Gross margin was 27.1%, compared with 24.4%
2007. Interest income from sales-type leasing was $2.3 million,
compared with $1 million in 2007. General and administrative
expenses were $2.8 million, compared with $542,434 in 2007. The
increase was primarily because of the non-cash compensation expense
of approximately $856,000 related to the fair value of the stock
options to employees, increased costs associated with one-time,
non-recurring issuance and restructuring of the convertible notes
in 2008, 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 income before
tax, as defined in the "Summary of Financial Results" section, was
$5.5 million. GAAP income before tax was $3.5 million, compared
with $2.7 million in 2007. The effective tax rate was 47.1%,
compared with 20.2% in 2007. The increase was primarily because of
higher tax rates applied to the Company's main operating subsidiary
in Xi'an as China revalued preferential tax status for high-tech
enterprises last year. Given the Chinese government's commitment to
renewable energy, the Company is expecting to regain the
preferential tax rate, 15%, in the near future. Non-GAAP net income
was $3.9 million, or non-GAAP diluted EPS $0.10. GAAP net income
was $1.8 million, or GAAP diluted EPS of $0.03, compared with GAAP
net income of $1.9 million, or GAAP diluted EPS of $0.10 in 2007.
The lower GAAP net income reflected higher non-cash charges related
to convertible notes and stock-based employee compensation, as well
as higher tax rate levied in the city of Xi'an. As of December 31,
2008, the Company has total diluted shares outstanding of
59,861,719. As of December 31, 2008, cash and cash equivalents were
$7.3 million, compared with $1.6 million at December 31, 2007.
Total investments in sales-type leases were $16.8 million, compared
to $9.0 million at December 31, 2007. Net working capital increased
to $11.3 million from $7 million at December 31, 2007. The ratio of
current debt to current assets is 1.9:1 as of December 31 2008.
Total shareholders' equity was $32.4 million, at December 31, 2008
compared with $17.3 million at December 31, 2007. Other Highlights
On December 10, 2008, the Company received the immediately
effective resignation of Mr. Guangyu Wu as Chief Executive Officer,
member of the Board of Directors and Corporate Secretary. Also on
December 10, 2008, the Board of Directors appointed Mr. Xinyu Peng,
the Company's Chief Financial Officer, as Secretary and Guohua Ku,
47, as Chief Executive Officer and as a member of the Board of
Directors. Mr. Ku graduated from Northwestern University in China
with a Master's of Business Administration. He had served as the
senior technology and marketing officer for several large Chinese
state-owned companies at which he gained tremendous experience and
developed exceptional expertise on the development and operation of
energy-recycling programs. Year 2009 Guidance The Company expects
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.
Mr. Ku said, "Looking forward, we are encouraged that the Chinese
government has earmarked $31 billion, or 5% of the country's
$584-billion stimulus package, for the creation of a sustainable
environment. We believe the bulk of the spending will be to reduce
the pollution generated by heavy-industrial plants in Northern and
Western China, stimulating the growth of the use of low-emission
and energy-efficient power generators by our customers in the
steel, cement and chemical sectors. Considering this robust market
condition, we expect to complete at least 3 projects this year,
including Shengwei's phase two which should be completed in the
second quarter of 2009, with a projected product sales of
approximately $8 million and additional interest income of
approximately $1 million in 2009." Conference Call The Company will
host a conference call on Tuesday, March 24, 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 +1-877-407-8035
(North America) or +1-201-689-8035 (International) 10 minutes
before the call start time. A replay of the call will be available
through Tuesday, March 31, 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: 315790.
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. 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. (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 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 and annual
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. FINANCIAL TABLES TO FOLLOW CHINA RECYCLING ENERGY
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF AS
OF 31-Dec-08 31-Dec-07 ASSETS CURRENT ASSETS Cash & cash
equivalents $ 7,267,344 $ 1,634,340 Investment in sales type
leases, net 1,970,591 1,081,981 Interest receivable on sales type
lease 82,406 144,262 Prepaid expenses 3,849,087 -- Other
receivables 102,850 32,902 Inventory 10,534,633 9,870,315 Total
current assets 23,806,911 12,763,800 NON-CURRENT ASSETS Investment
in sales type leases, net 14,837,879 7,933,780 Advance for
equipment 2,642,889 2,467,579 Property and equipment, net 95,359 --
Construction in progress 3,731,016 -- Intangible assets, net 3,482
6,169 Total non-current assets 21,310,625 10,407,528 TOTAL ASSETS
45,117,536 23,171,328 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES Accounts payable 1,186,902 2,298,201 Unearned revenues
658,415 -- Tax payable 2,137,356 534,522 Accrued liabilities and
other payables 3,528,527 2,565,726 Advance from management --
71,508 Convertible notes, net of discount due to beneficial
conversion feature 5,000,000 315,068 Total current liabilities
12,511,200 5,785,025 ACCRUED INTEREST ON CONVERTIBLE NOTES 168,494
63,014 CONTINGENCIES AND COMMITMENTS MINORITY INTEREST 16,179
15,080 STOCKHOLDERS' EQUITY Common stock, $0.001 par value;
100,000,000 shares authorized, 36,425,094 and 25,015,089 shares
issued and outstanding as of December 31, 2008 and 2007,
respectively 36,425 25,015 Additional paid-in capital 30,475,360
19,070,908 Statutory reserve 1,319,286 832,467 Accumulated other
comprehensive income 3,582,587 1,718,260 Accumulated deficit
(2,991,995) (4,338,441) Total stockholders' equity 32,421,663
17,308,209 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 45,117,536
23,171,328 CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED 12/31 FOR
THE QUARTER ENDED 2008 2007 12/31/2008 9/30/2008 Revenue Sales of
products $ 8,048,956 $ 9,302,347 $ 8,048,956 $ -- Rental income
11,168,707 - 4,292,484 4,259,807 Total revenue 19,217,663 9,302,347
12,341,440 4,259,807 Cost of sales Cost of products 6,191,505
7,033,400 6,191,505 -- Rental expense 7,810,231 -- 3,000,220
2,977,402 Total cost of sales 14,001,736 7,033,400 9,191,725
2,977,402 Gross profit 5,215,927 2,268,947 3,149,715 1,282,405
Interest income on sales-type leases 2,285,582 1,015,712 569,038
576,817 Total operating income 7,501,509 3,284,659 3,718,753
1,859,222 Operating expenses General and administrative expenses
2,773,702 542,434 630,974 638,949 Total operating expenses
2,773,702 542,434 630,974 638,949 Income from operations 4,727,807
2,742,225 3,087,779 1,220,273 Non-operating income (expenses)
Investment income -- -- 9 17 Interest income 27,033 -- 27,033
Interest expense on convertible note (1,314,689) (377,402) (80,725)
(57,029) Finance expense -- -- (201) (990) Other income 108,999 --
108,999 -- Other expense (811) (48,562) (1) (248) Exchange loss
(82,237) -- (268) (1,524) Total non-operating expenses (1,261,705)
(425,964) 54,846 (59,774) Income before income tax 3,466,102
2,316,261 3,142,625 1,160,499 Income tax expense 1,632,754 466,647
836,296 427,960 Net income from continuing operations 1,833,348
1,849,614 2,306,329 732,539 Income from discontinued operations --
28,699 -- -- Less: minority interest 83 -- -- 27 Net income
1,833,265 1,878,313 2,306,329 732,512 Other comprehensive item
Foreign currency translation gain 1,864,327 680,586 (53,909)
807,806 Comprehensive income 3,697,592 2,558,899 2,252,420
1,540,318 Basic weighted average shares outstanding 32,095,814
18,160,385 36,425,094 36,425,094 Diluted weighted average shares
outstanding 59,861,719 18,855,897 36,997,300 36,997,300 Basic net
earnings per share 0.06 0.10 0.07 0.02 Diluted net earnings per
share 0.03 0.10 0.04 0.02 * 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 Apr 29,
2008 with conversion price contingent upon future net profits.
CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 12/31 2008 2007 CASH
FLOWS FROM OPERATING ACTIVITIES: Net income $1,833,265 $1,878,313
Adjustments to reconcile net income to net cash Used in operating
activities: Depreciation and amortization 18,079 -- Amortization of
discount related to conversion feature of convertible note
1,212,329 315,068 Stock option compensation expense 856,207 171,510
Accrued interest on convertible notes 105,480 63,014 Minority
interest 83 14,463 (Increase) decrease in current assets: Interest
receivable on sales type lease 61,856 (144,262) Prepaid equipment
rent (3,796,985) -- Other receivables (66,659) 212,288 Advances to
suppliers -- (1,590,891) Increase (decrease) in current
liabilities: Accounts payable (1,245,854) 2,204,167 Unearned
revenue 647,948 -- Advance from customers -- (179,787) Tax payable
1,530,420 523,190 Accrued liabilities and other payables 802,165
1,530,382 Net cash used in operating activities 1,958,334 4,997,455
CASH FLOWS FROM INVESTING ACTIVITIES: Investment in sales type
leases (7,063,105) (8,640,969) Acquisition of property &
equipment (115,350) -- Construction in progress (3,717,743) -- Net
cash used in investing activities (10,896,198) (8,640,969) CASH
FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 9,032,258
-- Convertible notes 5,000,000 5,000,000 Repayment to management
(75,108) -- Advance from shareholder -- 68,583 Net cash provided by
financing activities 13,957,150 5,068,583 EFFECT OF EXCHANGE RATE
CHANGE ON CASH & CASH EQUIVALENTS 613,718 (42,729) NET INCREASE
(DECREASE) IN CASH & CASH EQUIVALENTS 5,633,004 1,382,340 CASH
& CASH EQUIVALENTS, BEGINNING OF YEAR 1,634,340 252,000 CASH
& CASH EQUIVALENTS, END OF YEAR 7,267,344 1,634,340
Supplemental Cash flow data: Income tax paid 152,881 -- Interest
paid -- -- For more information, please contact: In China: Mr. Leo
Wu Investor Relations China Recycling Energy Corp. Email: In the
U.S.: Mr. Valentine Ding Investor Relations Grayling Tel:
+1-646-284-9412 Email: DATASOURCE: China Recycling Energy Corp.
CONTACT: In China, Mr. Leo Wu, Investor Relations of China
Recycling Energy Corp., ; or in the U.S., Mr. Valentine Ding,
Investor Relations of Grayling, +1-646-284-9412, or , for CREG Web
Site: http://www.creg-cn.com/
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