2014

China Natural Gas Announces Year End 2012 Financial Results - 2012 Revenue Increases 17.0% Y o Y to $145.3 Million

- 2012 Gross Profit Increases 2.7% Y o Y to $49.5 Million

NEW YORK, April 1, 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 year ended December 31, 2012.

Fiscal year 2012 Results

Revenue for the year ended December 31, 2012 increased 17.0% to $145.3 million from $124.2 million for the year ended December 31, 2011, primarily attributable to the increase of revenue from LNG, which started in July 2011, and we operated LNG plant for the  whole year of 2012. Sales of natural gas grew approximately 24.6% year-over-year to $132.3 million, from $106.2 million for the year ended December 31, 2011, mainly due to our LNG business. Gasoline revenue for the year ended December 31, 2012 decreased 53.6% to $2.8 million, from $6.0 million in the prior year's period, because of the closure of two gasoline fueling stations during the fourth quarter of 2011 and one gasoline fueling stations during the fourth quarter of 2012 due to the low gross margin of gasoline. Installation and services revenue decreased 15.0% year-over-year to $10.2 million, from $12.0 million a year ago. For the year ended December 31, 2012, sales of natural gas, gasoline, and installation and other services contributed 91.0%, 1.9%, and 7.1% of total revenue, respectively.

Gross profit for the year ended December 31, 2012 expanded 2.7% to $49.5 million, from $48.2 million in the same period of 2011, the increase in gross profit was primarily attributable to the increase in revenue from LNG, offset by the decrease in natural gas revenue from our fueling stations. Gross margin for the year ended December 31, 2012 was 34.1%, compared to 38.8% a year ago, 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.

In total, operating expenses for the year ended December 31, 2012 increased by approximately $2.4 million to $29.7 million, from $27.4 million in the same period of 2011. The increase in operating expenses primarily due to the increase of transportation expense and depreciation mainly associated with our LNG business, which started in July 2011.

Operating income for the year ended December 31, 2012 was $19.8 million, a decrease of 5.0% year-over-year, from $20.9 million in the same period of 2011.

During the year ended December 31, 2012, the Company recognized $4 of non-cash gain from the change in the fair value of warrants, compared to $252,062 in the same period of 2011. Income tax expense was $3.2 million at an effective tax rate of 22.6%, as compared to an effective tax rate of 24.0% for the year ended December 31, 2011. Net income for the year ended December 31, 2012 decreased 27.7% to $11.0 million, or $0.52 per diluted share, from $15.3 million, or $0.71 per diluted share, for the year ended December 31, 2011, primarily due to the loss of $4,0 million on disposal of five fueling stations during the third quarter of 2012.

Excluding the impact of the non-cash expenses (see "About Non-GAAP Financial Measures" below), adjusted net income was $11.0 million, versus $15.3 million for the year ended December 31, 2011. For year ended December 31, 2012, adjusted earnings per diluted share was $0.51, versus $0.70 per diluted share for the year ended December 31, 2011.

Mr. Shuwen Kang, CEO of China Natural Gas, commented, "We are very pleased with our strong growth and profitability for the year ended December 31, 2012. During this year, we increased our number of pipeline customers to 122,020 and we have expanded into liquefied natural gas ("LNG") business. We continued to see higher sales volumes resulting from the increasing number of hybrid vehicle fleet and municipal vehicles in the city of Xi'an, which utilize compressed natural gas as a cleaner, cheaper and more efficient fuel alternative. We believe our strong performance in 2012 demonstrated the long-term market potentials for our CNG gas stations as well as our LNG business, piped natural gas and installation services for residential, commercial and industrial customers."

Financial Highlights for the Fiscal Year 2012:

  • Revenue increased by 17.0% to $145.3 million, primarily attributable to the realization of revenue from LNG, which started in July 2011;
  • Gross profit increased by 2.7% to $49.5 million;
  • Non-GAAP net income of $11.0 million, or $0.51 per diluted share.

Balance Sheet

As of December 31, 2012, the Company had cash and cash equivalents of $10.9 million, compared with $9.6 million as of December 31, 2011.

Mr. Kang concluded, "We remain optimistic about the market growth and potentials for natural gas usage in the developing Shaanxi, Henan and Hubei provinces. In future, we will  focus on sales to fleet fueling vehicles and fueling boat. We are confident that our strong balance sheet, our current infrastructure, technical expertise and strategic LNG 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. On July 16, 2011, we completed most of the construction of Phase I of the LNG plant and began commercial production and sale of LNG. The launch of the LNG plant is an important part of our integration strategies, which include strategic plans to develop our own network of LNG fueling stations in Shaanxi, Henan and Hubei Provinces."

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 20 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; (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.

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 YEAR ENDED DECEMBER 31, 2012 AND 2011




















For the year ended









December 31









2012


2011














GAAP Net Income





11,037,267


15,261,932














Add:












Amortization of discount on senior notes


-


-




Amortization of deferred offering costs


-


-




Change in fair value of warrants



(4)


(252,062)



Non-GAAP Net Income




11,037,263


15,009,870



 (Excludes all non-cash items)









Weighted average shares outstanding









Basic





21,458,654


21,418,389




Diluted





21,458,654


21,418,389














GAAP Basic EPS





0.51


0.71



Add:












Amortization of discount on senior notes


0.0000


0.0000




Amortization of deferred offering costs


0.0000


0.0000




Change in fair value of warrants



0.0000


(0.0118)



Non-GAAP Basic EPS




0.51


0.70














GAAP Diluted EPS





0.51


0.71



Add:












Amortization of discount on senior notes


0.0000


0.0000




Amortization of deferred offering costs


0.0000


0.0000




Change in fair value of warrants



0.0000


(0.0118)



Non-GAAP Diluted EPS




0.51


0.70


 

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, 2012 and 2011

(Stated in US Dollars)




As of December 31,




2012



2011









ASSETS                                                                                                          









CURRENT ASSETS:









Cash and cash equivalents


$

10,857,456



$

9,622,883


Accounts receivable, net



2,148,379




2,997,845


Other receivables, net



458,605




540,646


Employee advances



399,031




285,270


Inventories



2,473,933




1,938,754


Advances to suppliers



4,869,606




4,540,139


Prepaid expense and other current assets



3,541,431




4,470,687


Total current assets



24,748,441




24,396,224











Investment in unconsolidated joint ventures



1,587,000




1,574,000


Property and equipment, net



179,515,563




174,097,754


Construction in progress



53,393,933




45,882,320


Deferred financing cost, net



-




517,334


Goodwill



839,806




629,729


Other intangible assets



21,400,924




18,910,244


Prepaid expenses and other assets



7,015,142




10,976,203


TOTAL ASSETS


$

288,500,809



$

276,983,808











LIABILITIES AND STOCKHOLDERS' EQUITY


















CURRENT LIABILITIES:









Senior notes- current maturities


$

38,352,498



$

9,671,682


Current portion of bank loan payable



4,761,000




4,722,000


Redeemable liabilities - warrants



17,500,000




-


Accounts payable and accrued liabilities



6,756,278




7,694,423


Other payable - related party



1,616,429




787,000


Short-term borrowing - related party



2,679,945




1,359,945


Unearned revenue



3,663,570




4,280,594


Accrued interest



1,936,584




1,029,431


Taxes payable



2,232,546




2,626,271


Total current liabilities



79,498,850




32,171,346











LONG-TERM LIABILITIES:









Senior notes, net of current portion



-




25,791,151


Bank loan payable, net of current portion



4,761,000




9,444,000


Borrowings - related party



-




1,320,000


Warrants liability



-




17,500,000


Total long-term liabilities



4,761,000




54,055,151


Total liabilities


$

84,259,850



$

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 December 31, 2012 and 2011



2,145




2,145


Additional paid-in capital



83,501,637




82,909,485


Accumulated other comprehensive income



21,276,931




19,817,493


Statutory reserves



11,818,087




10,124,710


Retained earnings



87,410,615




77,903,478


Noncontrolling interests



231,544




-


Total stockholders' equity



204,240,959




190,757,311


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

288,500,809



$

276,983,808


 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 and 2011

(Stated in US Dollars)




Years Ended December 31,




2012



2011









Revenue









Natural gas


$

132,255,499



$

106,178,398


Gasoline



2,782,062




5,998,022


Installation and other



10,243,727




12,045,106





145,281,288




124,221,526











Cost of revenue









Natural gas



88,790,622




65,062,505


Gasoline



2,626,569




5,756,960


Installation and other



4,327,203




5,183,985





95,744,394




76,003,450











Gross profit



49,536,894




48,218,076











Operating expenses









Selling



22,266,885




17,377,703


General and administrative



7,456,049




9,984,565





29,722,934




27,362,268











Income from operations



19,813,960




20,855,808











Non-operating income (expense):









Interest income



68,472




42,290


Interest expense



(1,248,842)




(771,916)


Loss on disposal of fixed assets



(4,020,260)




-


Other income (expense), net



144,464




126,100


Change in fair value of warrants



4




252,062


Foreign currency exchange loss



(499,575)




(430,723)





(5,555,737)




(782,187)











Income before income tax



14,258,223




20,073,621











Provision for income tax



3,220,954




4,811,689











Net income



11,037,269




15,261,932


Less: Loss (income)
attributable to
noncontrolling interests



(163,245)




-


Net income attributable to
China Natural Gas, Inc.



11,200,514




15,261,932











Other comprehensive
income









Foreign currency translation gain



1,459,438




4,150,348


Comprehensive income


$

12,659,952



$

19,412,280











Weighted average
shares outstanding









Basic



21,458,654




21,418,389


Diluted



21,458,654




21,418,389











Earnings per share









Basic


$

0.52



$

0.71


Diluted


$

0.52



$

0.71


 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

As of December 31, 2012 and 2011

(Stated in US Dollars)




For the Years ended December 31,





2012



2011



CASH FLOWS FROM OPERATING ACTIVITIES:










Net income



11,037,269




15,261,932



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










Depreciation and amortization



14,025,863




9,600,518



Provision for (recovery of) doubtful accounts



197,942




110,166



Loss (Gain) on disposal of equipment



4,020,260




(3,385)



Stock-based compensation



592,152




627,660



Change in fair value of warrants



(4)




(252,062)



Change in assets and liabilities:










Accounts receivable



992,933




(1,201,079)



Other receivables



(194,338)




(339,941)



Employee advances



(111,449)




27,679



Inventories                                                                



(146,105)




(860,723)



Advances to suppliers



(846,886)




(2,729,776)



Prepaid expense and other current assets



1,407,530




(133,968)



Accounts payable and accrued liabilities



(1,136,395)




2,064,383



Unearned revenue



(651,968)




1,787,063



Accrued interest



907,153




382,903



Taxes payable



(415,154)




137,886



Net cash provided by operating activities



29,678,803




24,479,256












CASH FLOWS FROM INVESTING ACTIVITIES:










Payment for acquisition of property and equipment



(4,780,369)




(7,314,640)



Proceeds from sales of property and equipment



2,852,712




16,990



Additions to construction in progress



(14,604,880)




(11,769,752)



Prepayment on long-term assets



(1,164,454)




(1,169,313)



Payment for acquisition of business



(656,593)




(976,500)



Payment for intangible assets



(1,813,996)




(189,843)



Net cash used in investing activities



(20,167,580)




(21,403,058)













CASH FLOWS FROM FINANCING ACTIVITIES:










Proceeds from exercise of stock options



-




670,075



Proceeds from short-term borrowing and other payable,
related parties



-




3,454,945



Repayment of long -term debt



(4,758,000)




(4,650,000)



Repayment of senior notes



(3,333,334)




(3,333,334)



Net cash (used in) provided by financing activities



(8,091,334)




(3,858,314)













Effect of exchange rate changes on cash and cash
equivalents



(185,316)




358,750













NET INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS



1,234,573




(423,366)













CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR



9,622,883




10,046,249



CASH AND CASH EQUIVALENTS, END OF YEAR


$

10,857,456



$

9,622,883



SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:










Interest paid, net of capitalized interest


$

941,966



$

742,224



Income taxes paid


$

3,422,353



$

4,683,774













Non-cash transactions for investing and financing
activities:










Construction material transferred to construction in progress


$

67,100



$

7,396,787



Construction in progress transferred to property and
equipment


$

19,393,132



$

94,607,146



Construction in progress transferred to intangible assets


$

-



$

11,676,342



Advances to suppliers transferred to construction in
progress


$

-



$

7,652,350



Other assets transferred to construction in progress



2,754,075




3,070,647



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


$

6,107,601



$

4,203,896










































For more information, please contact:


China Natural Gas, Inc.



Chaoyang Qiao, CFO



Phone: +86-29-8832-3325 x903



Cell: +86-137-0918-2877



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.



RELATED LINKS
http://www.naturalgaschina.com
http://us.lrd.yahoo.com/SIG=12bttf662/**http:/studio-5.financialcontent.com/prnews?Page=Quote&Ticker=CHNG

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