China Recycling Energy Corporation Reports 520% Increase in 9 Months' Profit for 2013 Third Quarter Financial Results

XI'AN, China, Nov. 14, 2013 /PRNewswire-FirstCall/ -- China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announces its financial results for the 2013 third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights (Comparison data is for the same period Year-over-Year)

• Total sales was $21.74 million, an increase of 21.26 million as compared to $0.48 million for the third quarter of 2012.
• Income from operations was $10.46 million, increased 108% compared to $5.03 million for the third quarter of 2012.
• The net income is 4.39 million, while it was a net loss of 1.41 million in the third quarter of 2012.
• Fully diluted EPS of $0.08, increased 167% compared to $0.03 for the third quarter of 2012.
• Completion and Delivery of Pucheng 2^nd Phase - 12MW BMPG Systems.

Summary of Financial Results:

Mr. Guohua Ku, Chairman and Chief Executive Officer of China Recycling Energy, commented, "As we completed two 3 MW BPRT systems of Shanxi Datong project and the 12 MW BMPG system of Pucheng Phase II project, we now have 15 systems completed in total. With new completed projects, we are very delighted to see there is a large increase in the total sales and net income. At the meantime, the company is seeking cooperation with companies across China and developing economic financing methods. We will expand our recycling energy market and reward our shareholders with consistent and growing profits."

Mr. Ku continued to comment: "All our projects under construction are going on well and are expected to be delivered on time. While developing new projects, we also focus on the development and improvement of recycling energy technology, applying new technology to our existing projects and developing more projects, which in turn becomes a beneficial cycle for us and our customers. We intend to be the leader in the development of recycling energy technology, bringing more social and economic benefits to our customers, provide better results to our investors, and make greater contributions to the environmental protection of the country."

Financial Results for Three Months Ended September 30, 2013

Total sales, including system sales and contingent rental income, for the three months ended September 30, 2013 was $21.74 million while total sales for the comparable period of 2012 was $0.48 million, an increase of $21.26 million as a result of an increase in the sales of systems. Of the total sales, sales of systems for the three months ended September 30, 2013 was $21.39 million, compared to $0 million for the comparable period of 2012, an increase of $21.39 million. During the three months ended September 30, 2013, the Pucheng Biomass Phase II project was completed and sold. In the comparable period of 2012, none of the Company's power generation systems were completed and sold. For the three months ended September 30, 2013, the Company received contingent rental income of $0.35 million from the usage of electricity in addition to the minimum lease payments, compared to $0.48 million for the comparable period in 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 September 30, 2013 was $16.48 million while our COS for the comparable period of 2012 was $32,505, an increase of $16.45 million. This increase was due to the completion and sale of the Pucheng Biomass Phase II project compared with zero system sales in the previous comparable period.

Gross profit was $5.26 million for the three months ended September 30, 2013 compared to $0.44 million for the comparable period of 2012. Combined gross margin was 24% and 93% for the comparable periods of 2013 and 2012, respectively. The lower profit margin in the three months ended September 30, 2013 was mainly due to a relatively low profit margin of 24% that was realized from the sale of the Pucheng Biomass Phase II project.

Interest income on sales-type leases for the three months ended September 30, 2013 was $5.20 million, a $0.62 million increase from $4.59 million for the comparable period of 2012. During the third quarter of 2013, interest income was derived from 14 systems: one TRT system, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, two Pucheng biomass power generation systems, two Shenqiu biomass power generation systems and Zhongbao WHPG system. Even though the Company sold Shanxi Datong Phase I project (consisting of two 3MW BPRT power generation systems) in June 2013, the Company did not start collecting payments until July. In comparison, during the third 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.

Operating expenses consisted of selling, general and administrative expenses totaling $0.93 million for the three months ended September 30, 2013 compared to $3.59 million for the comparable period of 2012, a decrease of $2.66 million or 74%. This was mainly due to a $2.97 million loss resulting from the termination of the Erdos TCH Phase III power generation projects in 2012.

Net income for the three months ended September 30, 2013 was $4.39 million compared to net loss of $1.41 million for the comparable period of 2012, an increase of $5.80 million. This increase in net income was mainly due to the increased sales, interest income on sales-type leases, and decreased non-operating expenses compared with the comparable period of 2012.

For the three months ended September 30, 2013, GAAP diluted EPS was $0.08 with approximately 54.94 million shares of common stock outstanding, as compared with minus $0.03 in the same period of 2012 when the Company had 50.83 million shares of common stock outstanding.

As of September 30, 2013, the Company had cash and cash equivalents of $34.86 million, other current assets were $19.3 million and current liabilities were $65.47 million.

Financial Results for Nine Months Ended September 30, 2013

Total sales, including system sales and contingent rental income, for the nine months ended September 30, 2013 was $49.99 million while total sales for the comparable period of 2012 was $1.03 million, an increase of $48.96 million. This increase was a result of an increases in the sale of systems. Of our total sales, sales of systems for the nine months ended September 30, 2013 was $49.09 million, compared to $0 million for the comparable period of 2012, an increase of $49.09 million. The increase was primarily due to the Shenqiu Phase II project, the Shanxi Datong Phase I project and the Pucheng Biomass Phase II project being completed and sold in 2013; in comparision, no power generation system was completed and sold in 2012. For the nine months ended September 30, 2013, the Company received contingent rental income of $0.90 million from the usage of electricity in addition to the minimum lease payments, compared to $1.03 million for the comparable period in 2012. Sales-type lease, sales and COS are recorded at the time of leases. In addition to sales revenue, the interest income from the sales-type leases is our other major revenue source.

Cost of Sales for the nine months ended September 30, 2013 was $37.88 million, while our COS for the comparable period of 2012 was $0.08 million, an increase of $37.81 million. This increase was mainly due to the completion and sale of the Shenqiu Phase II project, the Shanxi Datong Phase I project (two 3MW BPRT power generation systems) and the Pucheng Biomass Phase II project.

Gross profit was $12.11 million for the nine months ended September 30, 2013 compared to $0.95 million for the comparable period of 2012, a gross margin of 24% and 93% for the comparable period of 2013 and 2012, respectively. This significant increase in our gross profit, but lower profit margin, for the nine months ending September 30, 2013 was primarily due to sale of the systems with a relatively low 24% average profit margin.

Interest income on sales-type leases for the nine months ended September 30, 2013 was $13.76 million, a $0.36 million decrease from $14.11 million for the comparable period of 2012. During the nine months ended September 30, 2013, interest income was derived from 14 systems: one TRT system, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, two Pucheng biomass power generation systems, two Shenqiu biomass power generation systems and Zhongbao WHPG system, and Shanxi Datong Phase I project. In comparison, during the nine months ended September 30, 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.

Operating expenses consisted of selling, general and administrative expenses totaling $2.70 million for the nine months ended September 30, 2013 compared to $5.18 million for the comparable period of 2012, a decrease of $2.48 million or 48%. This was mainly due to a $2.97 million loss resulting from the termination of the Erdos TCH Phase III power generation projects in 2012.

Our net income for the nine months ended September 30, 2013 was $11.43 million compared to $1.84 million for the comparable period of 2012, an increase of $9.58 million. This increase in net income was mainly due to three systems being completed and sold in 2013 compared with no systems sold in the comparable period of 2012.

For the nine months ended September 30, 2013, GAAP diluted EPS was $0.22 with approximately 52.18 million shares of common stock outstanding, as compared with $0.04 in the same period of 2012 when the Company had 51.11 million shares of common stock outstanding.

Net Investment in Sales-Type Leases as of September 30, 2013

The Company, through its subsidiary, Xi'an TCH leased TRT systems to Zhangzhi with terms of 13 years; and leased CHPG systems to Tong Chuan, Shengwei, and Jing Yang Shengwei respectively for 5 years, BMPG systems to Pucheng Phase I and II for 15 and 10 years respectively, BMPG systems to Shenqiu Phase I for 11 years, Shenqiu Phase II for 9.5 years, a power and steam generating system from waste heat from metal refining to Erdos (five projects) for 20 years, WHPG system of Zhongbao for nine (9) years, and Datong two BPRT systems for 30 years.

The components of the net investment in sales-type leases as of September 30, 2013 and December 31, 2012 are as follows:

As of September 30, 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 third quarter, Non-GAAP net income was $5.48 million, as compared with $4.4 million in the 2013 second quarter and $0.27 million in the 2012 third 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.

Financial Results Conference Call

The Company will host a conference call at 8:30 a.m. EST on Monday, November 18, 2013, to discuss the Company's third quarter 2013 financial results. Mr. Guohua Ku, Chief Executive Officer, and Mr. David Chong, Chief Financial Officer, will be hosting the call.

Investors are invited to participate on the live call by dialing 1-877-870-4263 for domestic investors. International investors can dial 1-412-317-0790.

10Q Filing
For more information regarding China Recycling Energy Corp.'s financial performance during the quarter ended September 30, 2013, please refer to the Quarterly Report on Form 10-Q, which is being filed with the Securities and Exchange Commission on Nov 14, 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 or +65-9721-6163
Email: [email protected]

SOURCE China Recycling Energy Corp.