NF Energy Saving Corporation Announces Fourth Quarter and Fiscal Year 2010 Results

-- Revenue for the year increased 24.8% over the prior year period to $25.4 million

-- Net income for the year was $4.3 million, representing a net margin of 17.0%

Mar 25, 2011, 08:45 ET from NF Energy Saving Corporation

SHENYANG, China, March 25, 2011 /PRNewswire-Asia-FirstCall/ -- 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 fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Highlights

  • Revenues increased 42.0% year-over-year to $7.3 million
  • Gross profit declined 24.4% year-over-year to $1.3 million, representing a gross margin of 17.7%
  • Net income was $0.5 million or $0.09 per diluted share, representing a net margin of 6.8%

Fiscal Year 2010 Highlights

  • Revenues increased 24.8% year-over-year to $25.4 million
  • Gross profit rose 3.2% year-over-year to $6.8 million, representing a gross margin of 26.9% compared to 32.6% in the year ago period
  • Net income was $4.3 million or $0.79 per diluted share, representing a net margin of 17.0%
  • Common stock listed on NASDAQ Global Market

"Looking at NF Energy's performance for the year as a whole we are satisfied with the Company's operations and the results that we have achieved," commented Mr. Gang Li, Chief Executive Officer of the Company. "Although the Company's total revenue and profitability for the second half of the year was adversely affected by our move to our new facility and this financial result was a disappointment to us, we weigh this against the potential of our new facility that has the ability to eventually triple our production capacity to 20,000 tons per year."

Fiscal Year 2010 Results

Revenue for the fiscal year 2010 increased 24.8% to $25.4 million, from $20.3 million in the same period of 2009. The growth in revenue is primarily attributable to a significant increase in revenues from the Company's services and projects segments.  

Gross profit for the fiscal year 2010 was $6.8 million, an increase of 3.2% over the $6.6 million in gross profit generated in the fiscal year 2009. Gross margin was 26.9% compared to 32.6%. This decrease in gross margin was mainly due to higher raw materials prices than expected and in some cases the Company was unable to pass the increases on to customers.

Operating expenses were $1.2 million and $1.1 million, or 4.9% and 5.6% of total revenues for the year ended December 31, 2010 and 2009 respectively. Increases in operating costs included the commencement of Land Use Right (LUR) tax payments on the Company's new facility, and the amortization of the cost of an intangible asset. In addition, the Company issued $960,000 of convertible notes at the beginning of 2010, and the issuance cost of the convertible notes also increased operating expenses.

Income from operations for the fiscal year 2010 was $5.6 million, an increase of 2.2% from the $5.5 million of income from operations generated in the year ago period.

Net income for the fiscal year 2010 was $4.3 million, or $0.79 per diluted share compared to net income of $4.8 million or $0.90 per diluted share in the fiscal year 2009.  Earnings per share reflect the one for 2.5 reverse split of the Company's common stock affected in September 2010.

Fourth Quarter 2010 Results

Revenue increased 42.0% to $7.3 million, from $5.1 million in the same period of 2009. Gross profit in the fourth quarter of 2010 was $1.3 million, a decrease of 24.4% over the $1.7 million in gross profit generated in the fourth quarter of 2009. The decrease in gross profit was largely the result of higher raw materials prices and in some cases the Company was unable to pass the increases on to customers.

Net income from operations for the fourth quarter of 2010 was $0.8 million and operating margins declined to 10.4% from 30.3% in the year ago period. Contributing to higher operating costs in the quarter was a full year of land use tax charge and increased amortization of intangible asset cost, totalling approximately $0.13 million for the new facility. In 2011 and going forward, the land use charge will be evenly spread across four quarters.

Net income for the 2010 fourth quarter was $0.5 million, or $0.09 per diluted share compared to net income of $1.4 million or $0.25 per diluted share in the fourth quarter of 2009 based on 5.5 million and 5.3 million fully diluted shares outstanding respectively.

Financial Condition

As of December 31, 2010, the Company had $0.8 million in cash and cash equivalents compared to $0.2 million in cash and cash equivalents on December 31, 2009. Working capital was $11.5 million.

The Company generated $3.4 million in net cash from operating activities for the twelve months ending December 31, 2010, compared to $2.9 million in the same period of 2009.

Recent Events and Updates

On Feb 23, 2011, NF Energy announced that it was honored with the highest award in China's Conservation Services Industry – "Well-known Brand Enterprise" award by China Energy Conservation Industry Service Committee. The Company's Chairman and CEO, Mr. Gang Li, was nominated for "The Man of 2010 China Energy Conservation Services Industry" award. The China Energy Conservation Service Industry Annual Conference is organized by the China Energy Conservation Service Industry Committee.

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 Friday, March 25, 2011, to discuss the Company's fourth quarter and fiscal year 2010 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 call pass code is 53222423.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, March 25, 2011 at 10:00 a.m. ET. 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 53222423.

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. The majority of revenues are from energy efficient flow control equipment and energy efficiency projects. 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

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

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

As of December 31,

2010

2009

ASSETS

Current assets:

  Cash and cash equivalents

$

823,717

$

227,329

  Accounts receivable, net

14,658,067

12,510,875

  Retention receivable, current

813,579

874,759

  Inventories

823,398

638,775

  Deferred tax assets

-

1,408

  Prepayments and other receivables

1,193,397

603,456

Total current assets

18,312,158

14,856,602

Retention receivable, non-current

469,377

-

Plant and equipment, net

4,166,584

2,169,740

Land use right, net

3,058,507

-

Construction in progress

8,027,219

9,045,332

TOTAL ASSETS

$

34,033,845

$

26,071,674

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable, trade

$

3,503,697

$

2,055,839

  Short-term bank borrowing

1,512,447

-

  Current portion of obligation under finance lease

492,264

437,917

  Income tax payable

121,136

201,480

  Amount due to a related party

318,946

-

  Other payables and accrued liabilities

902,889

2,081,344

Total current liabilities

6,851,379

4,776,580

Long-term liabilities:

Convertible promissory notes, net

889,730

-

Obligation under finance lease

36,827

675,809

TOTAL LIABILITIES

7,777,936

5,452,389

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value; 50,000,000 shares authorized;  5,326,501 and 5,326,501 shares issued and outstanding,  respectively

5,326

5,326

Additional paid-in capital

8,443,563

7,977,221

Statutory reserve

1,965,556

1,449,345

Accumulated other comprehensive income

2,215,900

1,348,382

Retained earnings

13,625,564

9,839,011

Total stockholders' equity

26,255,909

20,619,285

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

34,033,845

$

26,071,674

NF ENERGY SAVING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

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

Years ended December 31,

2010

2009

REVENUES, NET

  Products

$

16,786,854

$

17,439,021

  Services

7,828,840

2,884,976

  Project

756,512

-

Total revenues, net

25,372,206

20,323,997

COST OF REVENUES:

  Cost of products

12,629,265

11,638,113

  Cost of services

5,287,351

2,062,591

  Cost of project

617,818

-

Total cost of revenues

18,534,434

13,700,704

GROSS PROFIT

6,837,772

6,623,293

OPERATING EXPENSES:

  Sales and marketing

81,885

122,446

  General and administrative

1,152,712

779,778

  Stock based compensation

-

236,088

Total operating expenses

1,234,597

1,138,312

INCOME FROM OPERATIONS

5,603,175

5,484,981

Other (expense) income:

  Interest income

1,007

10,807

  Interest expense

(522,653)

(50,809)

  Other income

-

10,168

  Subsidy income

-

81,374

INCOME BEFORE INCOME TAXES

5,081,529

5,536,521

Income tax expense

(778,765)

(760,642)

NET INCOME

$

4,302,764

$

4,775,879

Other comprehensive income:

- Foreign currency translation gain

867,518

59,809

COMPREHENSIVE INCOME

$

5,170,282

$

4,835,688

Net income per share:

- Basic

$

0.81

$

0.90

- Diluted

$

0.79

$

0.90

Weighted average common shares outstanding:

- Basic

5,326,501

5,316,860

- Diluted

5,458,109

5,326,723

NF ENERGY SAVING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

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

Years ended December 31,

2010

2009

Cash flows from operating activities:

Net income

$

4,302,764

$

4,775,879

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

  Depreciation and amortization

394,033

356,263

  (Reversal of) allowance for doubtful accounts

(6,389)

12,656

  (Gain) loss on disposal of plant and equipment

(225)

6,885

  Deferred tax expense

1,420

-

  Interest expenses, non-cash

396,072

236,088

Change in operating assets and liabilities:

  Accounts and retention receivable

(2,040,981)

(4,466,259)

  Inventories

(158,836)

881,297

  Prepayments and other receivables

(495,757)

47,420

  Accounts payable, trade

1,343,841

6,812

  Income tax payable

(85,065)

201,315

  Other payables and accrued liabilities

(290,879)

871,542

Net cash provided by operating activities

3,359,998

2,929,898

Cash flows from investing activities:

  Purchase of plant and equipment

(42,221)

(179,131)

  Payments on construction in progress

(4,836,398)

(3,625,495)

  Proceeds from disposal of plant and equipment

1,261

45,354

Net cash used in investing activities

(4,877,358)

(3,759,272)

Cash flows from financing activities:

  Advance from a related party

318,209

-

  Proceeds from short-term bank borrowing

1,475,198

-

  Payments on finance lease

(607,269)

(1,218,445)

  Proceeds from convertible promissory notes

900,000

-

Net cash provided by (used in) financing activities

2,086,138

(1,218,445)

Effect on exchange rate change on cash and cash equivalents

27,610

22,377

NET CHANGE IN CASH AND CASH EQUIVALENTS

596,388

(2,025,442)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

227,329

2,252,771

CASH AND CASH EQUIVALENTS, END OF YEAR

$

823,717

$

227,329

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Cash paid for income taxes

$

862,254

$

561,036

  Cash paid for interest

$

91,745

$

50,836

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Settlement of note payable to offset with accounts receivable

$

544,481

$

-

Transfer from construction in progress to plant and equipment

$

2,167,487

$

-

Transfer from construction in progress to land use right

$

3,044,062

$

-

Construction in progress under payable to PRC government

$

-

$

1,018,134

Construction in progress under finance lease obligation

$

-

$

2,059,457

SOURCE NF Energy Saving Corporation



RELATED LINKS

http://www.nfenergy.com