Cleantech Solutions International Reports Third Quarter 2015 Results

- Revenues were $12.0 million with net income of $0.9 million, or $0.23 per basic and diluted share

Nov 13, 2015, 07:30 ET from Cleantech Solutions International, Inc.

WUXI, China, Nov. 13, 2015 /PRNewswire/ -- Cleantech Solutions International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a manufacturer of metal components and assemblies used in various clean technology and manufacturing industries and textile dyeing and finishing machines, and, since the first quarter of 2015, the petroleum and chemical industries, today announced its financial results for the three and nine months ended September 30, 2015.

"In the third quarter of 2015, challenging economic conditions, falling steel prices and limited availability of credit in China presented numerous challenges for our business. Our forged rolled rings and related products segment in particular experienced a significant reduction in sales and operated at a loss during the quarter. In our dyeing equipment segment, we experienced softer demand for our low-emission airflow dyeing machines as many of our customers already upgraded to newer models last year and much of our remaining customer base does not have the ability to make significant capital expenditures at this time. We continue to deliver parts and equipment under our contract with a large state-owned enterprise for a major chemical project in Xinjiang, which helped offset the decreases in revenue from our other two segments," said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. "Despite these difficult conditions, we remained profitable and our financial condition is strong."  

Third Quarter 2015 Results

Revenue for the third quarter of 2015 decreased by 40.6% to $12.0 million, compared to $20.2 million for the same period of 2014.

The Company experienced lower sales of forged rolled rings and related components to customers in the wind power and other industries and to dyeing and finishing equipment customers compared to the comparable quarter last year. These decreases were partially offset by sales of equipment to customers in the petroleum and chemical industries.   

  • Revenue from the sale of forged rolled rings and related products to the wind power and other industries fell by 83.2% to $1.4 million, compared with $8.4 million for the comparable period of the prior year. Economic conditions in China, overall capital expenditures, and the availability of credit are adversely affecting customer demand. 
  • Revenue from the dyeing and finishing equipment segment decreased by 29.2% to $8.4 million, compared to $11.8 million for the third quarter of 2014. In order to reduce business risk, the Company postponed shipments of low-emission airflow dyeing machines to certain customers who were behind in payments.  In addition, the Company experienced softer demand for its low-emission airflow dyeing machines in 2015, as many of its customers had upgraded to new models in 2014 and did not require additional equipment in 2015.  Finally, the Company believes that orders for new low-emission airflow dyeing machines have slowed down in 2015 because much of the remaining potential customer base does not have the ability to make the significant capital expenditures necessary to upgrade equipment.
  • The Company generated $2.3 million in revenues from sales of equipment to customers in the petroleum and chemical industries during the third quarter, particularly from a large state-owned enterprise, which accounted for all of the petroleum and chemical segment revenue for the third quarter of 2015.  This new business segment began shipping orders in the first quarter of 2015.  

Gross profit for the third quarter of 2015 decreased by 57.2% to $2.0 million, compared to $4.7 million for the same period in 2014. Gross margin was 16.6% during the third quarter of 2015 compared to 23.1% for the same period a year ago. The decline in gross margin for the third quarter of 2015 was primarily attributable to (i) the reduced scale of operations resulting from lower revenues, including the allocation of fixed costs mainly consisting of depreciation, to cost of revenues in the forged rolled rings and related products segment combined with a slight increase in labor costs, as a result of which cost of revenue from this segment were greater than revenues, resulting in a negative gross profit from the segment, and (ii) the contribution of revenue from the sale of equipment to customers in the petroleum and chemical industries, which currently has a low gross margin because the Company is a new entrant to this market and is offering lower prices to attract customers. These decreases were partially offset by a slight increase in gross margin from the dyeing and finishing equipment segment associated with a larger proportion of higher margin models in the product mix.

Operating expenses decreased 28.0% to $0.7 million, compared to $1.0 million in the comparable period last year. The decrease was primarily due to lower selling, general and administrative expenses, partially offset by an increase in depreciation expenses related to new office equipment, furniture and other improvements which the Company started depreciating in 2014.

Operating income was $1.3 million, compared to operating income of $3.7 million in the same period of 2014. Operating margin was 10.6% compared to 18.1% in the same period of 2014.

EBITDA, a non-GAAP measurement, which adds interest expense, income tax, depreciation and amortization to net income, was $3.3 million, compared to $5.9 million in the third quarter of 2014.  The calculation of EBITDA is shown in a table following the financial statements.

Net income for the third quarter of 2015 was $0.9 million, or $0.23 per basic and diluted share, compared to net income of $2.7 million, or $0.70 per basic and diluted share, in the third quarter of 2014.   

Nine Month Results

For the nine months ended September 30, 2015, revenue was $42.9 million compared to $55.4 million in the first nine months of 2014. Gross profit was $7.8 million, down from $13.0 million in the first nine months of 2014. Gross margin was 18.1%, compared to 23.5% in the first nine months of 2014. Operating income was $4.8 million compared to $10.0 million in the first nine months of 2014. EBITDA, a non-GAAP measurement, was $11.1 million, compared to $16.4 million in the first nine months of 2014. Net income was $3.4 million, compared to $7.3 million in the first nine months of 2014. Net income per basic and diluted share was $0.86 compared to $1.99 in the first nine months of 2014. 

Financial Condition

As of September 30, 2015, Cleantech Solutions held cash and cash equivalents of $18.7 million compared to $7.8 million at December 31, 2014. Accounts receivable were $17.2 million compared to $20.3 million at December 31, 2014. Inventories were $3.9 million compared to $4.2 million at December 31, 2014. Total current assets were $41.7 million as of September 30, 2015. The Company had $3.1 million in short-term bank loans payable at September 30, 2015, relatively unchanged from December 31, 2014.  Stockholders' equity was $97.6 million at September 30, 2015. In the first nine months of 2015, the Company generated $11.3 million in cash flow from operations.

Business Outlook

"With China's industrial sector facing lower fixed asset investment and slower production, we expect the next few quarters to remain challenging. In the coming months, our primary focus will be on our core dyeing and equipment operations and executing the orders we have on hand in the petroleum and chemical segment. We remain confident in the long-term growth opportunities in China, particularly in the area of clean energy, and we are exploring opportunities to expand into new lines of business," Mr. Wu concluded.     

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.

About Cleantech Solutions International

Cleantech Solutions is a manufacturer of metal components and assemblies, primarily used in clean technology and other industries and dyeing and finishing equipment for the textile industry and forged rolled rings and related products, and a supplier of fabricated products and machining services to a range of clean technology customers, and a supplier of products for the petroleum and chemical industries. The Company's website is www.cleantechsolutionsinternational.com. Any information on the Company's website or any other website is not a part of this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies.These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein and in the conference call referred to in this press release as anticipated, believed, estimated or expected. 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, including factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2014 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended September 30, 2015. All forward-looking statements attributable to the Company or to 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.

Company Contacts:

Cleantech Solutions International, Inc. Adam Wasserman, CFO E-mail: adamw@cleantechsolutionsinternational.com Web: www.cleantechsolutionsinternational.com

Compass Investor Relations Elaine Ketchmere, CFA Email: eketchmere@compass-ir.com +1-310-528-3031 Web: www.compassinvestorrelations.com

- tables to follow -

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS)/INCOME

For the Three Months Ended

For the Nine Months Ended

September 30,

Spetember 30,

2015

2014

2015

2014

REVENUES

$      12,025,433

$   20,246,555

$    42,862,498

$   55,409,844

COST OF REVENUES

10,023,347

15,570,370

35,094,790

42,375,936

GROSS PROFIT

2,002,086

4,676,185

7,767,708

13,033,908

OPERATING EXPENSES:

     Depreciation

160,564

148,371

672,656

376,640

     Selling, general and administrative

537,601

825,379

2,206,587

2,590,445

     Research and development

23,935

29,328

81,195

87,447

        Total Operating Expenses

722,100

1,003,078

2,960,438

3,054,532

INCOME FROM OPERATIONS

1,279,986

3,673,107

4,807,270

9,979,376

OTHER INCOME (EXPENSE):

     Interest income

11,633

4,141

30,150

13,286

     Interest expense

(61,131)

(60,487)

(175,102)

(178,313)

     Grant income

-

2,735

-

34,821

     Foreign currency transaction (loss)/gain

-

(2)

(11)

1,268

     Other income

-

33,799

-

67,665

        Total Other Income (Expense), net

(49,498)

(19,814)

(144,963)

(61,273)

INCOME BEFORE INCOME TAXES

1,230,488

3,653,293

4,662,307

9,918,103

INCOME TAXES

326,357

953,552

1,289,172

2,604,100

NET INCOME

$           904,131

$     2,699,741

$      3,373,135

$     7,314,003

COMPREHENSIVE INCOME:

      NET INCOME

$           904,131

$     2,699,741

$      3,373,135

$     7,314,003

      OTHER COMPREHENSIVE (LOSS) INCOME:

           Unrealized foreign currency translation (loss)/gain

(4,217,933)

29,648

(3,415,632)

(645,827)

      COMPREHENSIVE (LOSS) INCOME

$       (3,313,802)

$     2,729,389

$        (42,497)

$     6,668,176

NET INCOME PER COMMON SHARE:

    Basic

$                0.23

$            0.70

$             0.86

$            1.99

    Diluted

$                0.23

$            0.70

$             0.86

$            1.99

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

    Basic

3,943,725

3,859,986

3,939,486

3,666,543

    Diluted

3,943,725

3,859,986

3,939,486

3,666,543

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2015

December 31, 2014

ASSETS

(Unaudited)

CURRENT ASSETS:

    Cash and cash equivalents

$         18,672,230

$         7,835,791

    Restricted cash

582,329

488,719

    Notes receivable

248,670

114,034

    Accounts receivable, net of allowance for doubtful accounts 

17,158,938

20,316,037

    Inventories, net of reserve for obsolete inventories

3,854,729

4,241,022

    Advances to suppliers

629,605

565,581

    Deferred tax assets 

363,012

375,744

    Prepaid expenses and other

172,104

153,260

        Total Current Assets

41,681,617

34,090,188

PROPERTY AND EQUIPMENT, net

61,302,025

69,628,597

OTHER ASSETS:

   Equipment held for sale

408,222

422,540

   Land use rights, net 

3,478,202

3,672,420

        Total Assets

$       106,870,066

$     107,813,745

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

    Short-term bank loans

$           3,147,723

$         3,095,219

    Bank acceptance notes payable

582,329

488,719

    Accounts payable

4,012,473

4,322,275

    Accrued expenses

556,354

1,059,579

    Advances from customers

837,408

495,461

    VAT and service taxes payable

169,913

500,569

    Income taxes payable

-

531,120

        Total Current Liabilities

9,306,200

10,492,942

        Total Liabilities

9,306,200

10,492,942

Commitments and contingencies

STOCKHOLDERS' EQUITY: 

    Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and 

        outstanding at September 30, 2015 and December 31, 2014)

-

-

    Common stock ($0.001 par value; 50,000,000 shares authorized; 3,943,986 and 3,859,986

        shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively)

3,944

3,860

    Additional paid-in capital

33,803,333

33,517,857

    Retained earnings

53,120,069

50,039,267

    Statutory reserve

3,586,532

3,294,199

    Accumulated other comprehensive income - foreign currency translation adjustment

7,049,988

10,465,620

        Total Stockholders' Equity

97,563,866

97,320,803

        Total Liabilities and Stockholders' Equity

$       106,870,066

$     107,813,745

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

Spetmber 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income

$       3,373,135

$    7,314,003

    Adjustments to reconcile net income from operations to net cash

         provided by operating activities:

         Depreciation

6,166,899

6,245,723

         Amortization of land use rights

71,966

72,141

         Amortization of prepaid expense

-

13,774

         Stock-based compensation

285,560

271,661

    Changes in operating assets and liabilities:

         Notes receivable

(142,843)

461,461

         Accounts receivable

2,546,105

729,430

         Inventories

250,193

(2,959,168)

         Prepaid value-added taxes on purchases

-

256,691

         Prepaid and other current assets

21,114

(11,280)

         Advances to suppliers

(85,798)

113,219

         Accounts payable

(168,462)

(314,445)

         Accrued expenses

(487,275)

(215,395)

         VAT and service taxes payable

(323,532)

388

         Income taxes payable

(574,783)

(967,226)

         Advances from customers

369,986

(1,216,756)

NET CASH PROVIDED BY OPERATING ACTIVITIES

11,302,265

9,794,221

CASH FLOWS FROM INVESTING ACTIVITIES:

         Purchase of property and equipment

(12,573)

(10,822,897)

NET CASH USED IN INVESTING ACTIVITIES

(12,573)

(10,822,897)

CASH FLOWS FROM FINANCING ACTIVITIES:

         Proceeds from bank loans

4,545,012

3,091,592

         Repayments of bank loans

(4,382,690)

(3,091,592)

         (Increase) Decrease in restricted cash

(113,625)

244,073

         Increase (decrease) in bank acceptance notes payable

113,625

(244,073)

         Net proceeds from sale of common stock

-

1,623,691

NET CASH PROVIDED BY FINANCING ACTIVITIES

162,322

1,623,691

EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

(615,575)

(2,582)

NET INCREASE IN CASH AND CASH EQUIVALENTS

10,836,439

592,433

CASH AND CASH EQUIVALENTS - beginning of period

7,835,791

1,114,873

CASH AND CASH EQUIVALENTS - end of period

$      18,672,230

$    1,707,306

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    Cash paid for:

         Interest

$          175,102

$      178,313

         Income taxes

$       1,863,955

$    3,571,325

NON-CASH INVESTING AND FINANCING ACTIVITIES:

    Property and equipment acquired on credit as payable

$                    -

$      321,064

    Common stock issued for future service

$                    -

$        90,554

 

 

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

For the Three Months Ended

For the Nine Months Ended September 30,

 September 30,

2015

2014

2015

2014

Net income

$    904,131

$ 2,699,741

$   3,373,135

$   7,314,003

Add: income tax

326,357

953,552

1,289,172

2,604,100

Add: interest expense

61,131

60,487

175,102

178,313

Add: depreciation and amortization

2,045,999

2,184,933

6,238,865

6,317,864

Adjusted EBITDA

$ 3,337,618

$ 5,898,713

$ 11,076,274

$ 16,414,280

 

 

SOURCE Cleantech Solutions International, Inc.



RELATED LINKS

http://www.cleantechsolutionsinternational.com