China Architectural Engineering Announces Second Quarter 2010 Financial Results

ZHUHAI, China and NEW YORK, Aug. 16 /PRNewswire-Asia-FirstCall/ -- China Architectural Engineering, Inc. ("CAE" or the "Company") (Nasdaq: CAEI), a provider of design, engineering, fabrication and installation of high-end building envelope systems, today announced its financial results for the second quarter ended June 30, 2010.

Second Quarter 2010 Results

Revenues from contracts for the second quarter of 2010 were $5.7 million, a decrease of $24.9 million, or 81%, from $30.6 million for the comparable period in 2009, mainly as a result of fewer projects, due to the declining global construction activities and the Company's suspension of international projects.

Gross loss was $0.4 million, compared to a gross profit $10.0 million for the second quarter of 2009. The decrease in gross profit was primarily a result of increases in raw material, labor and administrative costs in China, as well as adjustments made in accordance to the percentage-of-completion method of accounting because of increases in estimated costs of current projects.

Selling, general and administrative expenses were $1.8 million for the second quarter of 2010, versus $6.1 million a year ago. Payroll expenses accounted for approximately 44% of the total expenses, followed by depreciation expenses of 8%, and rental expenses of 6%.

Interest expenses were $1.9 million for the second quarter ended June 30, 2010, an increase of $0.4 million from $1.5 million a year ago. The increase was mainly due to the additional interest expense related to short-term bank loans, as well as the increase in accretion of bonds interest discount.

Net loss was $3.3 million, or a loss of $0.06 per fully diluted share, compared to a net profit of $2.5 million, or $0.05 per fully diluted share, for the comparable period in 2009.

Liquidity and Capital Resources

The Company had an unrestricted cash balance of approximately $0.6 million as of June 30, 2010, as compared to $0.5 million as of March 31, 2010. Net cash provided by operating activities was $9.0 million for the six months ended June 30, 2010, compared to $2.7 million for same period in 2009.

Mr. Ken Luo, chairman and chief executive officer of CAE, commented, "Our second quarter sales performance was primarily impacted by the fewer number of projects executed as a result of the global economic slowdown. However, this summer, we have seen a much improved market sentiment. Leveraging our unique design, technology and craftsmanship, we have signed new contracts in the second quarter worth approximately $21.5 million, including the Terrace Garden Project and Xinhai Revolution Museum in Hubei, and Liuzhou Sports Centre in Guangxi. We are also making good progress in the designing and constructing of high-end curtain wall system segment. We expect most of these revenues to be recognized in the second half of this year. With our advanced technical capabilities, we have strategically targeted China's high-end landmark projects that involve more design and consulting services to highlight our value proposition and capabilities. To date, we have won approximately $3 million worth of such contracts, including contracts with the Shenzhen Airport, Hangzhou Railway Station and Joy Coast at Overseas Chinese Town."

Business Updates

Mr. Luo continues, "Despite the difficult global economic crisis that heavily impacted high-end construction and engineering companies, we are working diligently to counter the negative impact on CAE. Such efforts include our corporate restructuring, through which we believe that CAE can benefit from a more diversified business model, while lowering both operational and financial risks. We are pleased to announce that we have entered into a definitive agreement for the acquisition of a 60% interest in ConnGame. We expect to announce the closing of this deal in the near future. After the completion of this acquisition, we envision CAE becoming a web-based engineering and design service platform that complements ConnGame's core online gaming business.

"In the architecture construction and engineering segment, we will be more selective and focus only on quality projects that return higher profits and pose lower risks. In the online gaming segment, we currently intend to launch our new games in the following months, and we expect this segment to soon drive the majority of our revenues. We believe our pending acquisition of a 60% interest in ConnGame will enable CAE to take greater advantage of our core architectural engineering and design market, and more importantly, to capture China's large and rapidly growing online game market.

"Upon the completion of the acquisition, CAE's board and management team will be reorganized to reflect the new business model. I truly look forward to the new management team to grow our combined businesses and to deliver greater value to our supportive shareholders," Mr. Luo concludes.

About China Architectural Engineering

China Architectural Engineering, Inc. (NASDAQ: CAEI) is a provider of design, engineering, fabrication and installation services of high-end curtain wall systems, roofing systems, steel construction systems, and eco-energy systems. Founded in 1992, CAEI has maintained its market leadership by providing timely, high-quality, reliable, fully integrated, and cost-effective solutions. Collaborating with world-renowned architects and building engineers, the Company has successfully completed over one hundred large, complex and unique projects worldwide, including numerous award-winning landmarks across Asia's major cities.

For further information on China Architectural Engineering, Inc., please visit http://www.caebuilding.com .

Forward-Looking Statements

In addition to historical information, the statements set forth above may include forward-looking statements that may involve risk and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Actual results could differ materially from the expectations contained in forward-looking statements as a result of risks and uncertainties, including, but not limited to, the proposed acquisition of ConnGame; difficulties in moving into the online gaming market; the Company's ability to integrate the personnel and operations of the Company and ConnGame; required Company payments under the waiver agreement and ability to maintain the conditions of the bondholder extension; identification and remediation of the Company's deficiencies and weaknesses in its internal controls over financial reporting, potential claims or litigation that may result from the occurrence of restatements, ability to identify and secure debt, equity, and/or other financing required to continue the operations of the Company; difficulties related to integration and management of the combined operations; reduction or reversal of the Company's recorded revenue or profits due to "percentage of completion" method of accounting and expenses; increasing provisions for bad debt related to the Company's accounts receivable; fluctuation and unpredictability of costs related to our products and services; adverse capital and credit market conditions; fluctuation and unpredictability of costs related to the Company's products and services; expenses and costs associated with its convertible bonds, regulatory approval requirements and competitive conditions; and various other matters, many of which are beyond our control. These and other factors that may result in differences are discussed in greater detail in the Company's reports and other filings with the Securities and Exchange Commission.

    For more information, please contact:

    Investor Contact:
     ICR:
     Michael Tieu
     Tel:   +86-10-6599-7960
     Email: [email protected]

     Bill Zima
     Tel:   +1-203-682-8200
     Email: [email protected]



                      CHINA ARCHITECTURAL ENGINEERING, INC.
                           CONSOLIDATED BALANCE SHEETS
       AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009(STATED IN US
                                    DOLLARS)

                                                 June 30,    December 31,
                                                   2010          2009
                                               (unaudited)
    ASSETS
    Current assets
    Cash and cash equivalents                $     631,444  $    740,125
    Restricted cash                              3,102,371     3,033,819
    Contract receivables, net                   86,205,606    89,189,103
    Costs and earnings in excess of
     billings                                    8,424,430     8,100,580
    Job disbursements advances                   1,347,604     2,696,794
    Other receivables                           27,104,828    30,768,067
    Inventories                                    170,076       727,499
    Deferred income taxes, current                 112,603       113,033
    Other current assets                           256,510       297,838
    Total current assets                       127,355,472   135,666,858

    Non-current assets
    Plant and equipment, net                     2,214,877     2,539,457
    Intangible assets                               60,998        70,610
    Goodwill                                     7,995,896     7,995,896
    Other non-current asset                        377,910       287,586

    TOTAL ASSETS                             $ 138,005,153  $146,560,407


    Current liabilities
    Short-term bank loans                    $   6,969,821  $  9,529,880
    Accounts payable                            27,256,636    26,614,484
    Billings over costs and estimated
     earnings                                    4,613,674     6,098,666
    Amount due to shareholder                    3,540,998    10,080,345
    Other payables                              13,874,058     9,360,314
    Business and other taxes payable             4,670,310     4,923,771
    Customers' deposits                          5,939,674     6,392,676
    Other Accrual                                4,756,148     4,324,011
    Total current liabilities                   71,621,319    77,324,147

    Non-current liabilities
    Long term bank loans                     $      70,415  $    109,239
    Convertible bond payable, net               26,569,215    24,564,161


    TOTAL LIABILITIES                        $  98,260,949  $101,997,547

    STOCKHOLDERS' EQUITY
    Preferred stock, $0.001 par value,
     10,000,000 shares authorized, 0
     shares issued and outstanding at
     June 30, 2010 and December 31,
     2009; Common stock, $0.001 par
     value, 100,000,000 shares
     authorized, 55,156,874 shares
     issued and outstanding at June
     30, 2010 and 53,256,874 shares
     issued at and outstanding December
     31, 2009                                $      55,157  $     53,257
    Additional paid in capital                  28,465,904    26,495,876
    Statutory reserves                           3,040,595     3,040,595
    Accumulated other comprehensive income       3,931,932     3,868,437
    Retained earnings                            4,280,864    11,131,084
    Total Company shareholders' equity          39,774,452    44,589,249
    Noncontrolling interests                       (30,248)      (26,389)
    Total shareholders' equity                  39,744,204    44,562,860
    TOTAL LIABILITIES AND

    STOCKHOLDERS' EQUITY                     $ 138,005,153  $146,560,407





                      CHINA ARCHITECTURAL ENGINEERING, INC.
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
        FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2010 AND 2009
                              (STATED IN US DOLLARS)

                             Three Months Ended         Six Months Ended
                                  June 30,                   June 30,
                            2010           2009         2010         2009
    Contract
     revenues earned     $5,708,417   $30,598,974  $17,180,540   $66,942,038
    Cost of contract     (6,137,792)  (20,647,144) (15,281,985)  (48,809,377)
    revenues earned

    Gross profit /
     (Loss)               $(429,375)   $9,951,830   $1,898,555   $18,132,661

    Selling, general
     and administrative
     expenses            (1,845,895)   (6,119,798)  (6,068,575)  (12,070,828)

    Income / (Loss)
     from operations    $(2,275,270)   $3,832,032  $(4,170,020)   $6,061,833

    Interest income           2,867        46,259        5,283        49,965
    Interest expense     (1,867,885)   (1,463,851)  (3,493,996)   (2,775,584)
    Other expense            (8,081)           --       (8,930)           --
    Other income            816,414       138,619      823,928       160,456

    Income / (Loss)
     before taxation
     on Continuing
     Operations         $(3,331,955)   $2,553,059  $(6,843,735)   $3,496,670

    (Income tax) /
     tax benefit                 --            --       (9,575)           --

    Net earnings/
     (Loss) including
     non-controlling
     interests           (3,331,955)    2,553,059   (6,853,310)    3,496,670
    (Income) / Loss
     attributable to
     non-controlling
     interests                1,619        (1,405)       3,090        (1,405)

    Net earnings/(Loss)
     attributable to
     the Company        $(3,330,336)   $2,551,654  $(6,850,220)   $3,495,265

    Earnings/(Loss)
     per share:
    Basic                    $(0.06)        $0.05       $(0.12)        $0.07
    Diluted                  $(0.06)        $0.05       $(0.12)        $0.07

    Weighted average
     shares outstanding:
    Basic                55,156,874    53,256,874   54,945,763    53,256,874
    Diluted              55,156,874    53,256,874   54,945,763    53,256,874

SOURCE China Architectural Engineering, Inc.