NF Energy Saving Corporation Announces First Quarter 2011 Results

May 11, 2011, 07:00 ET from NF Energy Saving Corporation

SHENYANG, China, May 11, 2011 /PRNewswire-Asia/ -- NF Energy Saving Corporation. (NASDAQ: NFEC) ("NF Energy" or the "Company"), a leading energy saving services and solutions provider for China's power, petrochemical, coal, metallurgy, construction, and municipal infrastructure development industries, today reported financial results for its first quarter ended March 31, 2011.

First Quarter 2011 Highlights

  • Revenues decreased 7.9% year-over-year to $2.6 million
  • Gross profit increased 17.7% year-over-year to $0.8 million, representing a gross margin of 30.6%
  • Net income was $0.3 million or $0.05 per diluted share, representing a net margin of 11.2%
  • The Company's move to its new factory and development of the facilities on target for completion during the second quarter

"The first quarter is our slowest of the year and this year we used some capacity at our partially-completed facilities to manufacture profitable components for Shenyang's underground railway project, in addition to working on our core energy-saving flow control equipment.  As we near completion of the new factory during the second quarter we expect to be ready to begin work on the bulk of our core product orders in the third and fourth quarters.  We are on schedule with our 2011 plan and our outlook for the full year remains unchanged," said Mr. Gang Li, the Company's Chief Executive Officer.

First quarter 2011 results

Total revenue of $2.6 million for the three months ended March 31, 2011, decreased 7.9% from $2.8 million in the same period of 2010. This decrease is mainly due to a decrease in product revenue due to the partial completion of the Company's new factory and facilities and the consequent deferral of the bulk of the manufacturing of energy-saving flow control equipment to the second half of the year, offset by higher service revenues from sub-contracted fabrication work for Shenyang's underground railway project.

Gross profit in the first quarter of 2011 was $0.8 million, an increase of 17.7% over the $0.7 million in gross profit generated in the first quarter of 2010. The increase in gross profit was primarily due to the period-over-period increase in higher margin service revenues.

Total operating expenses were $327,753 for the three months ended March 31, 2011, as compared to $172,487 for the same period of 2010, mainly due to the increase of general and administrative ("G&A") expenses from land use right taxes on our new facility located in Yinzhou District Industrial Park and amortization of the cost of an intangible asset.

Income from operations was $471,729, for the three months ended March 31, 2011, as compared to $506,964 for the same period of 2010, a decrease of $35,235 or approximately 7.0%. This decrease is primarily due to lower revenue and the increase in operating expenses.

Net income for the first quarter was $292,326, or $0.05 per diluted share compared to net income of $367,183 or $0.07 per diluted share in the same period of 2010. This decrease is primarily due to the decrease in revenue and the increased operating expense. In addition, interest expense rose to $122,478 compared to $80,644 in the same quarter last year

Financial Condition

As of March 31, 2011, the Company had $3.1 million in cash and cash equivalents compared to $0.8 million in cash and cash equivalents on March 31, 2010. Working capital was $11.3 million.

The Company used $0.5 million in net cash from operating activities for the three months ended March 31, 2011, compared to generating $3.1 million in the same period of 2010.  Payments on construction in progress totaled $0.2 million.  Cash provided by financing activities totaled $2.9 million, largely composed of proceeds from the issuance of a $1.5 million short-term loan due June 10, 2011 and an RMB 10 million or approximately $1.5 million loan due February 16, 2012.

Guidance and Business Outlook

NF Energy reiterates its guidance for the full fiscal year 2011 revenue to be in the range of $30 million to $32 million and net income to be in the range of $6.0 million to $6.5 million. Guidance excludes any possible additional expenses for potential future financing activities.

Conference Call

NF Energy will host a conference call at 9:00 a.m. EDT on Wednesday, May 11, 2011, to discuss the Company's first quarter 2011 financial results. Hosting the call will be Mr. Gang Li, Chief Executive Officer, and Ms. Lihua Wang, Chief Financial Officer.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-877-275-8968 for U.S. based callers, or +1-706-643-1666 for international callers. The conference pass code for the call is 63765621.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Wednesday, May 11, 2011 at 12:00 p.m. EDT. To access the replay, U.S. based callers should dial 1-800-642-1687, international callers should dial +1-706-645-9291. The conference pass code will remain 63765621.

About NF Energy Saving Corporation

NF Energy Saving Corporation (NASDAQ: NFEC) is a China-based provider of integrated energy conservation solutions utilizing energy-saving equipment, technical services and energy management re-engineering project operations to provide energy saving services to clients. The Company's customers are mainly concentrated in the electrical generation (large-scale thermal power generation, hydroelectric power, wind power, and nuclear power), water supply, and heat supply industries. For more information, visit http://www.nfenergy.com

Safe Harbor Statement

The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, statements regarding the efficacy of investment in research and development are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in more detail in our filings with the Securities and Exchange Commission available at http://www.sec.gov.

Company Contact:

Investor Relations Contact:              

Ms. Lihua Wang, Director & CFO                  

Mr. Mark Collinson, Partner

Tel: +86 24-8563 1159

Tel: +1 310-954-1343

Email: wlh@nfenergy.com

Email: mark.collinson@ccgir.com

NF Energy Saving Corp.

CCG Investor Relations

Website: www.nfenergy.com

Website: www.ccgirasia.com

- FINANCIAL TABLES FOLLOW

NF ENERGY SAVING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

(Currency expressed in United States Dollars ("US$"), except for number of shares)

March 31, 2011

December 31, 2010

(Unaudited)

(Audited)

ASSETS

Current assets:

   Cash and cash equivalents

$

3,059,939

$

823,717

   Accounts receivable, net

13,208,933

14,658,067

   Retention receivable

1,095,649

813,579

   Inventories

1,289,599

823,398

   Prepayments and other receivables

495,796

1,193,397

Total current assets

19,149,916

18,312,158

Construction in progress

8,271,823

8,027,219

Land use rights, net

3,062,215

3,058,507

Plant and equipment, net

4,064,070

4,166,584

Retention receivable, non-current

7,309

469,377

TOTAL ASSETS

$

34,555,333

$

34,033,845

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable, trade

$

941,795

$

3,503,697

   Short-term bank borrowings

3,044,094

1,512,447

   Note payable

1,500,000

-

   Amount due to a related party

377,353

318,946

   Income tax payable

57,758

121,136

   Convertible promissory notes

960,000

-

   Current portion of obligation under finance lease

365,994

492,264

   Other payables and accrued liabilities

596,510

902,889

Total current liabilities

7,843,504

6,851,379

Long-term liabilities:

Convertible promissory notes, net

-

889,730

Obligation under finance lease

-

36,827

TOTAL LIABILITIES

7,843,504

7,777,936

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value; 50,000,000 shares authorized; 5,326,501 shares issued and outstanding as of March 31, 2011 and December 31, 2010

5,326

5,326

Additional paid-in capital

8,443,563

8,443,563

Statutory reserve

1,965,556

1,965,556

Accumulated other comprehensive income

2,379,494

2,215,900

Retained earnings

13,917,890

13,625,564

Total stockholders' equity

26,711,829

26,255,909

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

34,555,333

$

34,033,845

NF ENERGY SAVING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010

(Currency expressed in United States Dollars ("US$"), except for number of shares)

(Unaudited)

Three months ended March 31,

2011

2010

REVENUE, NET:

   Product

$

1,151,432

$

2,514,232

   Services

1,463,969

326,251

Total operating revenues, net

2,615,401

2,840,483

COST OF REVENUES:

   Cost of products

783,229

1,948,347

   Cost of services

1,032,690

212,685

Total cost of revenues

1,815,919

2,161,032

GROSS PROFIT

799,482

679,451

OPERATING EXPENSES:

   Sales and marketing

17,264

17,747

   General and administrative

310,489

154,740

Total operating expenses

327,753

172,487

INCOME FROM OPERATIONS

471,729

506,964

Other (expense) income:

   Interest income

664

243

   Interest expense

(122,478)

(80,644)

Total other expense

(121,814)

(80,401)

INCOME BEFORE INCOME TAXES

349,915

426,563

Income tax expense

(57,589)

(59,380)

NET INCOME

$

292,326

$

367,183

Other comprehensive income:

– Foreign currency translation gain

163,594

619

COMPREHENSIVE INCOME

$

455,920

$

367,802

Net income per share:

– Basic

$

0.05

$

0.07

– Diluted

$

0.05

$

0.07

Weighted average common shares outstanding:

– Basic

5,326,485

5,326,194

– Diluted

5,454,485

5,399,865

NF ENERGY SAVING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010

(Currency expressed in United States Dollars ("US$"))

(Unaudited)

Three months ended March 31,

2011

2010

Cash flows from operating activities:

Net income

$

292,326

$

367,183

Adjustments to reconcile net income to net cash (used in) provided by operating activities

Depreciation and amortization

144,240

72,674

Gain on disposal of plant and equipment

-

(223)

Interest expenses, non-cash

70,271

44,718

Change in operating assets and liabilities:

Accounts and retention receivable

1,725,242

6,112,379

Inventories

(459,625)

(581,915)

Prepayments and other receivables

702,816

(2,307,007)

Accounts payable

(2,576,571)

(318,645)

Income tax payable

(63,959)

(142,136)

Other payables and accrued liabilities

(311,335)

(107,462)

Net cash (used in) provided by operating activities

(476,595)

3,139,566

Cash flows from investing activities:

Purchase of plant and equipment

-

(13,054)

Payments on construction in progress

(193,088)

(3,253,693)

Proceeds from disposal of plant and equipment

-

1,250

Net cash used in investing activities

(193,088)

(3,265,497)

Cash flows from financing activities:

Advance from a related party

58,193

-

Payments on finance lease

(165,967)

(145,643)

Proceeds from convertible promissory notes

-

900,000

Proceeds from note payable

1,500,000

-

Proceeds from short-term bank borrowings

1,517,589

-

Net cash provided by financing activities

2,909,815

754,357

Effect on exchange rate change on cash and cash equivalents

(3,910)

(2,770)

NET CHANGE IN CASH AND CASH EQUIVALENTS

2,236,222

625,656

BEGINNING OF PERIOD

823,717

227,329

END OF PERIOD

$

3,059,939

$

852,985

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

121,548

$

59,378

Cash paid for interest

$

52,207

$

3,888

SOURCE NF Energy Saving Corporation



RELATED LINKS

http://www.nfenergy.com