China Natural Gas Announces Fourth Quarter and Year End 2009 Financial Results
- 4Q09 Revenue Increases 18% YoY to $21.67 Million
- 4Q09 Gross Profit Increases 11% YoY to $10.53 Million
NEW YORK, March 10 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (Nasdaq: 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 fourth quarter and full fiscal year ended December 31, 2009.
Fourth Quarter 2009 Results
Revenue in the fourth quarter of 2009 increased 18% to $21.67 million from $18.40 million in the fourth quarter of 2008, driven by additional fueling stations and higher residential and commercial pipeline customers. Sales of natural gas grew 6% year-over-year to $16.10 million, from $15.25 million in the fourth quarter of 2008. Gasoline revenue in the fourth quarter of 2009 increased 69% to $1.94 million, from $1.15 million in the prior year's period. Installation and services revenue grew 81% year-over-year to $3.63 million, from $2.0 million a year ago. In the fourth quarter of 2009, sales of natural gas, gasoline, and installation and other services contributed 74%, 9%, and 17% of total revenue, respectively.
Gross profit in the fourth quarter of 2009 expanded 11% to $10.53 million, from $9.49 million in the prior year's same period, driven by the increased sales volume of natural gas and increased revenue from installation business. Gross margin in the fourth quarter of 2009 was 49%, compared to 52% a year ago, mainly due to a 30% increase of coal bed methane procurement cost in Henan province.
Operating income in the fourth quarter of 2009 was $6.77 million, an increase of 17% year-over-year, from $5.77 million in the prior year's period. Meanwhile, operating expenses in the fourth quarter of 2009 increased by approximately $38,518 to $3.76 million, versus $3.72 million in the prior year's period.
During the quarter, the Company recognized $442,432 non-cash gain from an estimated change in the fair value of warrants, versus zero in the fourth quarter of 2008.
Income tax expense was $1.13 million for an effective tax rate of 16%, as compared to an effective tax rate of 21% in the fourth quarter of 2008. Net income in the fourth quarter of 2009 increased 64% to $6.12 million, or $0.27 per diluted share, from $3.73 million, or $0.26 per diluted share, in the fourth quarter of 2008.
Excluding the impact of the non-cash expenses (see "About Non-GAAP Financial Measures" toward the end of this release), adjusted net income was $5.68 million, versus $4.26 million in the fourth quarter of 2008. For the fourth quarter of 2009, adjusted earnings per diluted share was $0.26, versus $0.30 per diluted share in the fourth quarter of 2008.
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, commented: "We are very pleased with our strong growth and profitability for the fourth quarter and full year 2009. During this quarter, we increased our number of pipeline customers to 108,423, and we expanded the number of our CNG gas stations to 36. We continued to see higher sales volumes from the increasing number of hybrid fleet and municipal vehicles in the city Xi'an, which utilize compressed natural gas as a cleaner, cheaper and more efficient fuel alternative. We believe our strong performance in 2009 demonstrates the long-term market potential for our CNG gas stations as well as our piped natural gas and installation services for residential, commercial and industrial customers."
Financial Highlights for the Fiscal Year 2009:
-- Revenue increased 20% to $81.07 million, primarily due to the newly
added fueling stations in 2008 contributing full year revenue in 2009
and the addition of 1 new fueling station during 2009, as well as the
increase in installation and gasoline revenue;
-- Gross profit up 23% to $40.16 million;
-- Income from operations increased 19% to $25.05 million from 21.06 in
fiscal year 2008.
-- Non-GAAP net income of $20.21 million, or $1.20 per diluted share
Revenue for fiscal year 2009 increased 20% to $81.07 million from $67.72 million in fiscal year 2008, mainly due to the newly added fueling stations in 2008 contributing full year revenue in 2009 and the addition of 1 new fueling station during 2009, the increase in installation and gasoline revenue, and an increase in the number of residential and commercial pipeline customers to 108,423 as of December 31, 2009, from 96,033 as of December 31, 2008. Revenue from sales of natural gas increased 12% to $62.24 million from $55.75 million in the prior year. Installation and other revenue increased 69% to $12.45 million from $7.36 million in the fiscal year 2008. Gasoline revenue for the fiscal year was $6.38 million.
Gross profit for fiscal year 2009 increased 23% to $40.16 million from $32.74 million in 2008. Gross profit increase was mainly due to the increased sales volume of natural gas from fueling stations with low procurement price in coal bed methane from July 2008 to May 2009 in Henan; the increased sales volume of pipeline natural gas with stable unit price and cost; and the increased installation revenue from new pipeline customers. For fiscal year 2009, gross margin increased 120 basis points to 49.5% from 48.3% in 2008. The increase in gross margin was primarily due to lower coal bed methane procurement cost in Henan Province.
Operating expenses in the fiscal year 2009 increased 29% to $15.11 million from $11.68 million, reflecting costs associated with larger business operations, as well as continued expenses related to the acquisition of Lingbao Natural Gas, Co. in October 2008 as well as the newly added fueling stations since 2008. Operating income increased 19% to $25.05 million from $21.06 million. Operating margin decreased 20 basis points to 30.9% from 31.1% in the prior year, as a result of increased operating expenses.
Net income for fiscal year 2009 increased 24% to $18.83 million, or $1.13 per share, from $15.19 million, or $1.04 per share, in the fiscal year 2008. Excluding the impact of the non-cash expenses explained above, net income would have been $20.21 million, or $1.21 per diluted share, representing a year-over-year growth of 8%.
Balance Sheet
As of December 31, 2009, the Company had cash and cash equivalents of $48.18 million, compared with $55.93 million as of September 30, 2009, and $29.2 million as of June 30, 2009.
Mr. Ji concluded: "We remain very optimistic about the market growth and potential for natural gas usage in the developing Shaanxi and Henan provinces. We will continue to focus on growing our business strategically by steadily expanding our CNG customer base, especially focusing on sales to fleet vehicles and taxis. We are confident that our strong balance sheet, our current infrastructure, technical expertise and strategic CNG expansions will help sustain our steady growth and profitability.
"We also continue to remain optimistic about the long-term opportunities in the LNG market as China aims to increase natural gas usage. As recently announced, we expect the first phase our liquefied natural gas plant, the first LNG plant approved in Shaanxi, to be completed by June 30th. Upon the completion of our new LNG plant, we intend to aggressively grow our LNG business so as to capture a sizable share of China's emerging LNG market. We believe that once in full operations, our LNG business will enable us to further strengthen our market position, accelerate our growth and will bring greater value to our shareholders."
Conference Call
Management will hold a conference call on Thursday, March 11, 2010 at 8:00 a.m. EST (5:00 a.m. Pacific) to discuss these fourth quarter and year end results.
To participate in the call please dial (888) 549-7704, or (480) 629-9857 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found at the Company's website at http://www.naturalgaschina.com .
A replay of the call will be available for two weeks from 11:00 a.m. March 11, 2010, EST until 11:59 p.m. EDT on March 25, 2010. The number for the replay is (800) 406-7325, or (303) 590-3030 for international calls; the passcode for the replay is 4257535. In addition, a recording of the call will be available via the company's website at http://www.naturalgaschina.com for one year.
About China Natural Gas, Inc.
China Natural Gas 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 and Henan Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 23 CNG fuelling stations in Shaanxi Province and 12 CNG fuelling stations in Henan Province. China Natural Gas' four primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fuelling 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) the distribution and sale of gasoline through Company-owned CNG fuelling stations for hybrid (natural gas/gasoline) powered vehicles; and (4) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings that exclude the effect of non-cash non-operating expense related to the Senior Notes issued in January and March 2008 as well as change in fair market value of the Company's outstanding warrants. China Natural Gas' management uses those non-GAAP financial measures when it internally evaluates the performance of business and makes operating decisions, including internal budgeting and performance measurement. China Natural Gas 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 China Natural Gas' financial performance in comparison to historical periods, and it allows investors to evaluate China Natural Gas' performance using the same methodology and information as that used by China Natural Gas' 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.
The Company has provided a reconciliation table of the non-GAAP measure to the equivalent GAAP measure.
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008
Three months ended Twelve months ended
DECEMBER 31 DECEMBER 31
2009 2008 2009 2008
GAAP Net Income 6,118,889 3,732,315 18,830,787 15,190,368
Add:
Amortization of discount
on senior notes 449,676 280,250 1,004,677
Amortization of deferred
offering costs 80,987 63,940 227,989
Change in fair
value of warrants (442,432) 1,031,330
Non-GAAP Net Income 5,676,457 4,262,978 20,206,307 16,423,034
(Excludes all non-cash items)
Weighted average shares
outstanding
Basic 21,183,904 14,600,154 16,624,294 14,600,154
Diluted 21,697,822 14,600,154 16,830,907 14,645,070
GAAP Basic EPS 0.29 0.26 1.13 1.04
Add:
Amortization of
discount on senior
notes 0.0000 0.0308 0.0169 0.0688
Amortization of
deferred offering
costs 0.0000 0.0055 0.0038 0.0156
Change in fair
value of warrants (0.0209) 0.0620
Non-GAAP Basic EPS 0.27 0.30 1.21 1.12
GAAP Diluted EPS 0.28 0.26 1.12 1.04
Add:
Amortization of discount
on senior notes 0.0000 0.0308 0.0167 0.0686
Amortization of deferred
offering costs 0.0000 0.0055 0.0038 0.0156
Change in fair
value of warrants (0.0204) 0.0613
Non-GAAP Diluted EPS 0.26 0.30 1.20 1.12
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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 and 2008
2009 2008
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $48,177,794 $5,854,383
Accounts receivable, net of allowance
for doubtful accounts of $163,280 and
$0 as of December 31, 2009 and 2008,
respectively 1,289,116 906,042
Other receivable 709,741 60,784
Other receivable - employee advances 338,689 332,263
Inventories 841,837 519,739
Advances to suppliers 596,868 837,592
Prepaid expense and other current assets 1,076,915 777,510
Loan receivable 293,400 293,400
Total current assets 53,324,360 9,581,713
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 1,467,000 --
PROPERTY AND EQUIPMENT, NET 72,713,012 76,028,272
CONSTRUCTION IN PROGRESS 52,918,236 22,061,414
DEFERRED FINANCING COSTS 1,336,998 1,746,830
OTHER ASSETS 15,854,910 8,844,062
TOTAL ASSETS $197,614,516 $118,262,291
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $2,081,261 $800,013
Other payables 80,788 124,151
Unearned revenue 1,813,641 944,402
Accrued interest 786,052 861,114
Taxes payable 1,901,577 1,862,585
Total current liabilities 6,663,319 4,592,265
LONG TERM LIABILITIES:
Notes payable, net of discount of
$12,707,713 and $15,478,395 as of
December 31, 2009 and 2008, respectively 27,292,287 24,521,605
Derivative liabilities - warrants 19,545,638 17,500,000
Total long-term liabilities 46,837,925 42,021,605
Total liabilities 53,501,244 46,613,870
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per share;
5,000,000 shares authorized; none issued -- --
Common stock, $0.0001 per share; 45,000,000
shares authorized, 21,183,904 shares
and 14,600,154 shares issued and
outstanding at December 31, 2009 and 2008 2,118 1,460
Additional paid-in capital 79,851,251 32,115,043
Cumulative translation adjustment 8,714,019 8,661,060
Statutory reserves 5,962,695 3,730,083
Retained earnings 49,583,189 27,140,775
Total stockholders' equity 144,113,272 71,648,421
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $197,614,516 $118,262,291
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
Years Ended December 31,
2009 2008 2007
Revenues
Natural gas revenue $62,236,342 $55,746,893 28,278,033
Gasoline revenue 6,384,172 4,616,052 38,486
Installation and others 12,445,604 7,357,714 7,075,534
Total revenues 81,066,118 67,720,659 35,392,053
Cost of revenues
Natural gas cost 29,478,854 27,234,508 14,838,997
Gasoline cost 5,993,207 4,277,458 34,747
Installation and others 5,432,978 3,469,671 3,151,331
Total cost of revenues 40,905,039 34,981,637 18,025,075
Gross profit 40,161,079 32,739,022 17,366,978
Operating expenses
Selling expenses 9,566,387 7,651,948 3,451,161
General and
administrative expenses 5,541,885 4,024,882 2,837,768
Total operating
expenses 15,108,272 11,676,830 6,288,929
Income from operations 25,052,807 21,062,192 11,078,049
Non-operating income
(expense):
Interest income 125,287 209,502 70,697
Interest expense (747,172) (2,228,244) --
Other income (expense), net (186,805) 111,859 31,976
Change in fair value of
warrants (1,031,330) -- --
Foreign currency
exchange loss (69,077) (397,299) (150,729)
Total non-operating
expense (1,909,097) (2,304,182) (48,056)
Income before income tax 23,143,710 18,758,010 11,029,993
Provision for income tax 4,312,923 3,567,642 1,913,923
Net income 18,830,787 15,190,368 9,116,070
Other comprehensive income
Foreign currency
translation gain 52,959 5,184,035 2,637,573
Comprehensive income $18,883,746 $20,374,403 11,753,643
Weighted average shares
outstanding
Basic 16,624,294 14,600,154 13,100,340
Diluted 16,830,907 14,645,070 13,150,901
Earnings per share
Basic $1.13 $1.04 0.70
Diluted $1.12 $1.04 0.69
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
Years Ended December 31,
2009 2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $18,830,787 $15,190,368 $ 9,116,070
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 5,571,772 3,474,905 1,639,685
Loss on disposal of equipment 21,373 24,806 --
Amortization of discount on
senior notes 280,250 1,004,677 --
Amortization of financing costs 63,940 227,989 --
Options issued for services 66,535 66,704 --
Stock based compensation 158,517 -- --
Change in fair value of
warrants 1,031,330 -- --
Change in assets and
liabilities:
Accounts receivable (387,948) (568,370) 290,660
Other receivable (644,083) 247,349 36,929
Other receivable - employee
advances (6,425) (55,747) --
Inventories (322,099) (267,470) 71,226
Advances to suppliers 240,724 (125,896) 245,514
Prepaid expense and other
current assets (306,445) (642,857) (11,113)
Accounts payable and accrued
liabilities 45,888 275,929 28,531
Other payables (43,362) 63,239 (208,669)
Unearned revenue 869,239 583,940 22,425
Accrued interest (75,062) 861,114 --
Taxes payable 38,991 556,121 (754,817)
Net cash provided by operating
activities 25,433,922 20,916,801 10,476,441
CASH FLOWS FROM INVESTING
ACTIVITIES
Payment on investment in
unconsolidated joint ventures (1,467,000) -- --
Purchase of property and
equipment (1,074,066) (43,225,673)(14,180,053)
Proceeds from sales of
equipment 41,325 194,891 --
Proceeds from (purchases of)
short term investments -- 250,821 (229,106)
Additions to construction in
progress (28,020,498) (19,012,750) (519,309)
Prepayment on long term assets (6,139,766) (5,729,833) (1,914,343)
Return of acquisition deposit (283,200) -- --
Payment for intangible assets (161,486) (53,826) --
Payment for land use rights (432,566) (30,354) (42,529)
Net cash used in investing
activities (37,537,257) (67,606,724)(16,885,340)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Stock issued for cash 57,607,813 -- 15,000,000
Proceeds from senior notes -- 40,000,000 --
Payment for offering costs (3,237,454) (2,122,509) (1,176,533)
Net cash provided by financing
activities 54,370,359 37,877,491 13,823,467
Effect of exchange rate changes on
cash and cash equivalents 56,387 1,375,086 582,948
NET (DECREASE) INCREASE IN CASH &
CASH EQUIVALENTS 42,323,411 (7,437,346) 7,997,516
CASH & CASH EQUIVALENTS, BEGINNING
OF YEAR 5,854,383 13,291,729 5,294,213
CASH & CASH EQUIVALENTS, END OF
YEAR $48,177,794 $5,854,383 $13,291,729
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid, net of
capitalized interest $503,845 $902,777 $--
Income taxes paid $4,178,066 $2,998,627 $2,387,487
Non-cash transactions for investing
and financing activities:
Purchase of equipment through
accounts payable $1,234,603 $-- $--
Construction in progress
transferred to property and
equipment $-- $823,464 $--
Prepayment on long-term assets
transferred to property and
equipment $-- $405,630 $--
For more information, please contact:
China Natural Gas Inc.
Jacky Shi
IR Director
Tel: +86-29-8832-3325 x922
Cell: +86-139-9287-9998
Email: [email protected]
Investor Relations:
RedChip Companies, Inc.
Jon Cunningham
Tel: +1-800-733-2447 x107
Email: [email protected]
Web: http://www.RedChip.com
SOURCE China Natural Gas, Inc.
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article