China Recycling Energy Corporation Reports 2013 First Quarter Financial Results

XI'AN, China, May 15, 2013 /PRNewswire-FirstCall/ -- China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its financial results for the 2013 first quarter ended March 31, 2013.

Highlights

• Total sales was $14.34 million, an increase of 14.19 million as compared to $0.14 million for the first quarter 2012
• Net income was $3.30 million, up 63.1% from $2.02 million for the first quarter of 2012.
• Total Operating Income grew by 46.8% to $7.26 million from $4.95 million for the first quarter of 2012 .
• Fully diluted EPS of $0.07, as compared to $0.04 for the first quarter of 2012.
• Completion and Delivery of Shenqiu Phase II 12MW Biomass Power Generation Systems in Q1

Summary of Financial Results:

Mr. Ku continued, "In terms of completed projects, we are excited to announce that we further enlarged our project portfolio with the completion of Shenqiu Project Phase II, a 12 MW biomass power generation project, by the end of the first quarter of 2013. Currently, the total generation capacity of Shenqiu power plant is increased to 24MW, and bringing our total operating capacity to 124 MW."

"As we complete existed projects, we are making great efforts to develop new projects and business model. Besides the methods we currently applied for waste power generation, we are focusing on developing coke dry quenching (CDQ) waste heat power generation. With large-scale application of coke ovens, CDQ is a trend in the future for the industry. By using CDQ technology, the energy could be used more efficiently and pollution will be greatly reduced. Therefore, CDQ waste power generation could reduce the costs for electricity for enterprises and also help them to reduce environmental pollution. By doing this, we could expand our market share and develop more projects. Additionally, we are continuously seeking more cost-effective financing options for our company and our customers in an effort to better grow our business. We intend to expand our waste-to-energy power generating capacity rapidly in order to meet the continuous demand growth for energy to gain market share. We look forward to announcing the completion of projects under development now and in the future and bringing more savings to our customers."

Financial Results for Three Months Ended March 31, 2013

Total sales, including system sales and contingent rental income, for the three months ended March 31, 2013 was $14.34 million while the total sales for the comparable period of 2012 was $0.15 million, an increase of $14.19 million as a result of increases in system sales and in contingent rental income. Of the total sales, sales of systems for the three months ended March 31, 2013 was $14.08 million, as compared to $0 for the comparable period of 2012, an increase of $14.08 million. For the three months ended March 31, 2013, Shenqiu Phase II project was completed and sold. In comparison, in the same period of 2012, none of the Company's power stations has been completed and sold. For the three months ended March 31, 2013, the Company received contingent rental income of $0.26 million from actual usage of the electricity in addition to the minimum lease payments, compared to $0.15 million for the comparable period in year 2012.For the sales-type lease, sales and cost of sales ("COS") are recorded at the time of leases; interest income from the sales-type leases is our other major revenue source in addition to sales revenue.

Cost of sales for the three months ended March 31, 2013 was $10.90 million while our COS for the comparable period of 2012 was $14,383, an increase of $10.89 million which was mainly due to the fact that Shenqiu Phase II power generation was completed and sold during the three months ended March 31, 2013, while no project was sold during the comparable period of 2012.

Gross profit was $3.44 million for the three months ended March 31, 2013 compared to $0.13 million for the comparable period of 2012, a gross margin of 24% and 90% for the comparable period of 2013 and 2012, respectively.

Interest income on sales-type leases for the three months ended 2013 was $3.82 million, a $0.99 million decrease from $4.81 million for the comparable period of 2012. During the first quarter of 2013, interest income was derived from 11 systems: one TRT systems, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, the Pucheng biomass power generation system, Shenqiu biomass power generation system and Zhongbao WHPG system. The Company sold Shenqiu Phase II project on March 30, 2013, will start to collect the payment from April 2013. In comparison, during the first quarter of 2012, interest income was derived from 11 systems: one TRT systems, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, the Pucheng biomass power generation system, Shenqiu biomass power generation system and Zhongbao WHPG system.

Our net income for the three months ended March 31, 2013 was $3.30 million compared to $2.02 million for the comparable period of 2012, an increase of $1.28 million. This increase in net income was mainly due to the increased total sales compared with the comparable period of 2012.

For the first quarter of 2013, GAAP diluted EPS was $0.07 with approximately 50.22 million shares of common stock outstanding.  This compares with GAAP diluted EPS of $0.04 in the first quarter of 2012 when the Company had 53.01 million shares of common stock outstanding.

Financial Position as of March 31, 2013

As of March 31, 2013, the Company had cash and cash equivalents of $44.85 million, other current assets were $13.98million and current liabilities were $66.22 million.  Total shareholders' equity was $123.11 million, as compared with $119.36million as of December 31, 2012.

The components of the net investment in sales-type leases as of March 31, 2013 and December 31, 2012 are as follows:

As of March 31, 2013, the future minimum rentals to be received on non-cancelable sales-type leases by years are as follows: 

Non-GAAP Financial Measures

For the 2013 first quarter, Non-GAAP net income was 3.3 million, as compared with $1.6 million in the 2012 fourth quarter and $2.02 million in the 2012 first quarter.

The Company believes that "adjusted net income" and "adjusted earnings per share" information, when taken in conjunction with reported results, provide a useful measure of financial performance since they eliminate the impact of certain non-recurring, non-cash charges. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Additionally, the non-GAAP financial measures used by CREG may not be comparable to non-GAAP financial measures used by other companies.

10Q Filing

For more information regarding China Recycling Energy Corp.'s financial performance during the quarter ended March 31, 2013, please refer to the Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on May 15, 2013.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that exclude the effect of non-cash, non-operating expenses related to the Convertible Notes issued in April 2008, and the compensation expenses for the fair value of stock options, as well as deferred income tax expenses. The Company uses non-GAAP financial measures when it internally evaluates the performance of its business and makes operating decisions, including internal budgeting and performance measurement. The Company 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 CREG's financial performance in comparison to historical periods, and it allows investors to evaluate CREG's performance using the same methodology and information as that used by the Company's 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.

About China Recycling Energy Corp.

China Recycling Energy Corp. (NASDAQ: CREG or "the Company") is based in Xi'an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1 percent of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The management and engineering teams have over 20 years of experience in industrial energy recovery in China. For more information about CREG, please visit http://www.creg-cn.com.

Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. 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 at http://www.sec.gov. All forward-looking statements attributable to the Company or 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.

For more information, please contact:

     Mr. David Chong, Chief Financial Officer
     China Recycling Energy Corp.
     Tel:   +86-1370-1813139
     Email: [email protected] 

SOURCE China Recycling Energy Corp.