2014

China Natural Gas Announces Second Quarter 2013 Financial Results

XI'AN, China, Aug. 14, 2013 /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 second quarter ended June 30, 2013.

Second Quarter 2013 Results

Revenue in the second quarter of 2013 decreased by 9.6% to $34.2 million from $37.9 million in the second quarter of 2012, driven by the closure of three fueling stations in the second quarter of 2012, three fueling stations in the third quarter of 2012, one fueling station in October 2012, and one fueling station in April 2013 because of changes in market conditions. Sales revenue of natural gas decreased by 9.1% year-over-year to $31.8 million from $34.9 million in the second quarter of 2012. Gasoline revenue in the second quarter of 2013 decreased by 28.2% to $0.5 million, from $0.7 million in the same period of the prior year, mainly because the closure of one gasoline fueling stations during the fourth quarter of 2012. Installation and automobile conversion services revenue decreased by 12.9% year-over-year to $2.0 million, from $2.3 million a year ago. In the second quarter of 2013, sales of natural gas, gasoline, and installation and automobile conversion services contributed 92.7%, 1.5%, and 5.8% of total revenue, respectively.

Gross profit in the second quarter of 2013 decreased 18.7% to $11.2 million from $13.8 million in the same period of the prior year. Gross margin in the second quarter of 2013 was 32.8%, compared to 36.5% a year ago. Gross margin decreased primarily due to the decrease in gross margin for our LNG business.

Operating income in the second quarter of 2013 was $4.0 million, a decrease of 38.6% year-over-year from $6.6 million, primarily attributable to the decrease in gross profit of natural gas from fueling stations and LNG.

Income tax expense was $0.7 million at an effective tax rate of 18.2%, as compared to $1.3 million at an effective tax rate of 19.8% in the second quarter of 2012. The decrease of effective income tax rate was primarily attributable to the reduced income tax rate of 15% enjoyed by JBLNG beginning on January 1, 2013.

Net income in the second quarter of 2013 decreased by 37.4% to $3.2 million or $0.15 per diluted share from $5.1 million or $0.24 per diluted share in the second quarter of 2012.

As of June 30, 2013, the Company had $7.4 million of cash and cash equivalents on hand, compared to $10.9 million of cash and cash equivalents as of December 31, 2012. The decrease was primarily attributable to the construction of pipelines in Shaanxi Province and LNG fueling stations in Hubei Province, and the repayment of the loans from Shanghai Pudong Development Bank.

Net cash provided by operating activities was $10.0 million for the six months ended June 30, 2013, as compared to net cash provided by operations of $18.8 million for the six months ended June 30, 2012. The decrease was primarily due to the increase in advances to suppliers, accounts receivable and other receivable, and adjustments for non-cash expense items.

Conference Call

Management will hold a conference call on Friday, August 16, 2013 at 9:00 a.m. EDT (6:30 a.m. Pacific) to discuss its second quarter results.

To participate in the call please dial 1-800-860-2442, or 1 412-858-4600 for international calls, approximately 10 minutes prior to the scheduled start time.

A replay of the call will be available 1 hour after the end of the conference through End Date on Aug 26, 2013 at 9:00 am EDT. The number for the replay is 1-877-344-7529 or 1-412-317-0088 for international calls;the pass code for the replay is 10032849.

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. As of June 30, 2013, the Company owns approximately 120 km of high-pressure pipelines and operates 19 CNG fueling stations in Shaanxi Province, 10 CNG fuelling 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,and sales of LNG through our mobile fueling truck; (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. 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 tofourth 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 JUNE30, 2013 AND DECEMBER 31, 2012

(Stated in US Dollars)






June 30,
2013



(Audited)
December 31,
2012


ASSETS











CURRENT ASSETS:











Cash and cash equivalents




$

7,385,901



$

10,857,456


Accounts receivable, net





2,580,664




2,148,379


Other receivables, net





1,005,614




458,605


Employee advances





353,408




399,031


Inventories





2,916,691




2,473,933


Advances to suppliers





9,259,807




4,869,606


Prepaid expense and other current assets





3,009,853




3,541,431


    Total current assets





26,511,938




24,748,441













Investment in unconsolidated joint ventures





-




1,587,000


Property and equipment, net





181,454,681




179,515,563


Construction in progress





61,900,042




53,393,933


Goodwill





857,269




839,806


Other intangible assets





21,233,562




21,400,924


Prepaid expenses and other assets





7,538,785




7,015,142


TOTAL ASSETS




$

299,496,277



$

288,500,809













LIABILITIES AND STOCKHOLDERS' EQUITY






















CURRENT LIABILITIES:











Senior notes- current maturities




$

39,149,998



$

38,352,498


Current portion of bank loan payable





4,860,000




4,761,000


Redeemable liabilities - warrants





17,500,000




17,500,000


Accounts payable and accrued liabilities





6,554,897




6,756,278


Other payable - related party





840,041




1,616,429


Short-term borrowing - related party





2,679,945




2,679,945


Unearned revenue





3,283,380




3,663,570


Accrued interest





2,854,030




1,936,584


Taxes payable





1,507,698




2,232,546


Total current liabilities





79,229,989




79,498,850













LONG-TERM LIABILITIES:











Bank loan payable, net of current portion





3,240,000




4,761,000


Total liabilities




$

82,469,989



$

84,259,850













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 June30, 2013 and December 31, 2012, respectively





2,145




2,145


Additional paid-in capital





83,649,675




83,501,637


Accumulated other comprehensive income





26,073,493




21,276,931


Statutory reserves





12,737,218




11,818,087


Retained earnings





94,272,625




87,410,615


Noncontrolling interests





291,132




231,544


Total stockholders' equity





217,026,288




204,240,959


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY




$

299,496,277



$

288,500,809


 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE30, 2013 AND 2012

(Stated in US Dollars)



Three Months Ended



Six Months Ended



June 30,



June 30,



2013



2012



2013



2012

Revenues
















    Natural gas


$

31,765,252



$

34,927,804



$

63,945,320



$

64,327,491

    Gasoline



503,680




701,168




978,679




1,527,063

  Installation and others



1,979,026




2,272,723




4,823,289




4,324,459




34,247,958




37,901,695




69,747,288




70,179,013

















Cost of revenues
















    Natural gas



21,696,966




22,462,516




42,650,396




41,737,375

    Gasoline



453,364




655,614




874,025




1,443,758

  Installation and others



849,457




955,283




2,046,105




1,807,528




22,999,787




24,073,413




45,570,526




44,988,661

















Gross profit



11,248,171




13,828,282




24,176,762




25,190,352

















Operating expenses
















    Selling



6,034,037




5,619,864




11,587,891




10,570,664

  General and administrative



1,177,469




1,636,029




2,709,459




4,347,675




7,211,506




7,255,893




14,297,350




14,918,339

















Income from operations



4,036,665




6,572,389




9,879,412




10,272,013

















Other income (expense):
















    Interest income



10,973




9,853




20,696




20,599

    Interest expense



(171,992)




(275,643)




(361,371)




(707,680)

    Loss on disposal of fixed assets



(358)




-




(57,403)




-

    Loss on sales of long term investment



(500)




-




(80,150)




-

    Other income (expense), net



9,543




18,763




35,742




(14,330)

    Change in fair value of warrants



-




(1,146)




-




(1,229)

    Foreign currency exchange loss



(4,456)




1,494




(5,269)




(504,446)




(156,790)




(246,679)




(447,755)




(1,207,086)

















Income before income tax



3,879,875




6,325,710




9,431,657




9,064,927

















Provision for income tax



705,467




1,251,128




1,590,928




2,042,599

















Net income



3,174,408




5,074,582




7,840,729




7,022,328

Less: Income (loss) attributable to noncontrolling interests



32,735




28,876




59,588




(199,183)

Net income attributable to China Natural Gas, Inc.



3,141,673




5,045,706




7,781,141




7,221,511

















Other comprehensive income
















Foreign currency translation gain



3,494,137




(17,584)




4,796,562




1,741,216

Comprehensive income


$

6,635,810



$

5,028,122



$

12,577,703



$

8,962,727

















Weighted average shares outstanding
















Basic



21,458,654




21,458,654




21,458,654




21,458,654

Diluted



21,458,654




21,458,654




21,458,654




21,458,654

















Earnings per share
































Basic


$

0.15



$

0.24



$

0.36



$

0.34

Diluted


$

0.15



$

0.24



$

0.36



$

0.34

 

 

 

 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIXMONTHS ENDED JUNE30, 2013 AND 2012

(Stated in US Dollars)




2013



2012


CASH FLOWS FROM OPERATING ACTIVITIES:









Net income



7,840,729




7,022,328


Adjustments to reconcile net income to net cash  provided by operating activities:









  Depreciation and amortization



6,938,760




6,945,862


  Provision for (recovery of)doubtful accounts



110,063




202,100


  Loss (Gain) on disposal of equipment



57,403




-


  Loss (Gain) on sales of long term investment



80,150




-


  Stock-based compensation



148,038




296,076


  Change in fair value of warrants



-




1,229


  Change in assets and liabilities:









    Accounts receivable



(493,607)




1,035,676


    Other receivables



(963,970)




(146,652)


    Employee advances



53,069




(137,270)


    Inventories



(387,209)




(591,244)


    Advances to suppliers



(4,243,935)




(336,767)


    Prepaid expense and other current assets



655,917




3,527,412


    Accounts payable and accrued liabilities



494,285




1,830,593


    Unearned revenue



(451,580)




(311,342)


    Accrued interest



917,446




(25,477)


    Taxes payable



(763,178)




(462,934)


Net cash provided by operating activities



9,992,381




18,849,590











CASH FLOWS FROM INVESTING ACTIVITIES:









Payment for acquisition of property and equipment



(1,411,550)




(3,592,657)


Proceeds from sales of property and equipment



7,178




-


Proceeds from sales of long term investment



721,350




-


Additions to construction in progress



(10,367,064)




(10,459,937)


Prepayment on long-term assets



(170,460)




52,892


Payment for acquisition of business



-




(657,007)


Payment for intangible assets



-




(1,511,611)


Net cash used in investing activities



(11,220,546)




(16,168,320)











CASH FLOWS FROM FINANCING ACTIVITIES:









Repayment of short-term borrowing and other payable, related parties



(801,500)




-


Repayment of long-term debt



(1,603,000)




(793,500)


Repayment of senior notes



-




(3,333,334)


Increase in restricted cash



-




(1,890,641)


Net cash (used in) provided by financing activities



(2,404,500)




(6,017,475)











Effect of exchange rate changes on cash and cash equivalents



161,110




17,388











NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS



(3,471,555)




(3,318,817)











CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD



10,857,456




9,622,883











CASH AND CASH EQUIVALENTS, END OF PERIOD


$

7,385,901



$

6,304,066











SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:









Interest paid, net of capitalized interest


$

284,978



$

481,583


Income taxes paid


$

2,001,258



$

1,967,965











Non-cash transactions for investing and financing activities:









Construction materials transferred to Construction in progress


$

-



$

67,142


Construction in progress transferred to property and equipment


$

3,143,182



$

18,507,550


Capitalized interest - amortization of discount of notes payable and issuance cost


$

-



$

2,040,389


Other assets transferred to construction in progress


$

94,345



$

2,395,267


 

For more information, please contact:

China Natural Gas, Inc.     
Zhaoyang Qiao, CFO
Phone: +86-29-8832-7391
Email: qiaochaoyang@naturalgaschina.com

Jackie Shi
Investor Relations Director
Phone: +86-29-8832-3325 x922
Cell:  +86-139-9287-9998
Email: yjshi@naturalgaschina.com 

SOURCE China Natural Gas, Inc.



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