China Recycling Energy Corporation Reports Full Year 2010 Results

XI'AN, China, April 1, 2011 /PRNewswire-Asia-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 full year 2010.

Highlights for the full year 2010:

• Revenues were $75.61 million, an increase of 70.9% as compared to $44.23 million for full year 2009.
• Net income was $16.03 million, up 65.1% from $9.71 million for the full year 2009.
• Total Operating Income grew by 90.6% to $33.71 million from $17.69 million in the previous year.
• Fully diluted EPS of $0.33, as compared to $0.21 for full year 2009.
• On adjusted Non-GAAP measures, as defined below, non-GAAP net income grew to $25.88 million, or non-GAAP fully diluted EPS of $0.52, as compared to $13.59 million, or fully diluted EPS of $0.29, for the same period of 2009.

Summary of Financial Results:

Mr. Guohua Ku, Chairman and CEO of CREG commented, "The Company has continued to perform well ahead of expectations, achieving record revenue for the year ended December 31, 2010 and exceeding our guided revenue range of $68 - 72 million. Our non-GAAP net income figures came in at $25.88 million, above our target expectation of $22 million. Overall, our BOT business model, growth strategy and key partnerships have made this year the most successful year yet and we anticipate seeing this trend continue as we embark on more projects in the waste-to-energy space."

Mr. Ku continued, "In terms of completing projects, expanding our pipeline and building our R&D capabilities, CREG had an extremely productive year. We successfully completed the transformation of a number of projects including two 9 MegaWatt ("MW") capacity power generation systems for Phase I of the joint venture between TCH Xi'an and Erdos Metallurgy, two 9MW capacity power generation systems for Phase II of the joint venture between Xi'an TCH and Erdos Metallurgy, one 7MW capacity system for Zhongbao Binhai Nickel Co., and one 12MW power generation system for Pucheng Biomass Power Generation Company. As a result of our successful completion of a number power generation projects, 2010 was characterized by double digit revenue growth of 70% and interest income on sales type leases more than doubled as compared to the 2009 where less projects were completed and less interest income from sales type leases was booked. As more projects are completed, the trend of increasing interest income from sales type leases will continue to grow."

On the new product front, Mr. Ku continued, "We further expanded our recycling capabilities in 2010 entering into the exciting biomass industry. Our contract with PuCheng Biomass Power Generation Company brought $22.15 million in sales and $1.32 million interest income in 2010 and will continue to bring in at least $3.3 million cash payment annually for the duration of the 15 year contract. CREG is extremely pleased to continue growing our waste-to-energy business model to incorporate other industrial service companies and further develop our R&D platform. We anticipate that with the 12th 5 year plan announced and incentives provided for waste-to-energy recovery services, our expertise in variety of industrial service industries will continue to grow as more unique projects are undertaken."

"As mentioned earlier in the year, CREG entered into a strategic and capital based cooperation agreement with China Cinda Asset Management Co. ("Cinda"), one of the largest state-owned financial institutions in China.  Cinda has become a tactical long term partner helping us to expand our customer base to larger and more involved industrial players and to further grow our market share in the promising waste-to-energy market in China. Already Cinda has assisted with the development of our large projects such as the Phases IV and V of the joint venture between Xi'an TCH and Erdos Metallurgy. Of Cinda's industrial relationships, CREG has estimated that 300 potential projects can be undertaken in the near term provided financing is available for our use. We are currently working to evaluate all of our financing options to better support our company, our clients and in turn, increase our book of business and market share in this booming space.  We are excited about the coming year and the seemingly endless pipeline we have ahead of us. We look forward to updating you as more projects are finalized, financed and announced," commented Mr. Ku.

Financial Results for Full Year Ended December 31, 2010

Net sales for 2010 were $75.61 million, up $31.37 million from 2009 sales of $44.24 million. The increase primarily was due to the completion and sale of the second 9MW capacity Waste Heat Power Generation ("WHPG") system for Erdos Phase I in the first quarter of 2010, the completion and sale of Pucheng Biomass Power Generation System, completion and sale of Zhongbao Waste Heat Power Generation System ("WHPG"), the completion and sale of two 9MW capacity WHPG systems for Erdos Phase II project in the fourth quarter of 2010 and contingent rental income of $1.32 million from actual usage of the electricity in addition to the minimum lease payments from our Shengwei Group - Tongchuan Project, Erdos Project and Shenmu Project. While in 2009, we recorded $9.51 million revenue from the completion and sale of the Jin Yang CHPG system, $18.43 million revenue from the completion and sale of the Shenmu Waste Gas Power Generation ("WGPG") system and $10.34 million revenue from completion and sale of a 9 MW WHPG system for Erdos Phase I. In addition, we recorded rental income of approximately $5.95 million from the leasing our two power generating systems through an operating lease, which were not renewed when they expired in April 2009.

Gross profit was $18.57 million for 2010 compared to $10.63 million for 2009, representing a gross margin of 25% and 24% for 2010 and 2009, respectively. Gross profit was mainly from the sale of the second 9MW capacity WHPG systems for Erdos Phase I in the first quarter of 2010, sale of the Pucheng Biomass power generation system in the second quarter of 2010, sale of the Zhongbao WHPG system in the third quarter of 2010 and sale of the first and third 9MW WHPG systems for Erdos Phase in the fourth quarter of 2010. In 2009, gross profit was primarily derived from the sale of Jinyang Shengwei WHPG system, sale of Shenmu WGPG system and sale of a 9 MW WHPG system for Erdos Phase I.

Operating income was $33.71 million for 2010 while our operating income for 2009 was $17.69 million, an increase of $16.02 million. The growth in operating income was mainly due to the increase in interest income from selling and leasing our energy saving systems through sales-type leasing. Interest income on sales-type leasing for 2010 was $15.14 million, $8.08 million increase from $7.05 million for 2009. During 2010, the interest income was derived from nine systems: two TRT systems, two CHPG systems, one WGPG system, two WHPG systems associated with our Erdos Phase I project, the Pucheng biomass power generation system and Zhongbao WHPG system. Two 9MW WHPG systems of Erdos Phase II project were sold at the end of 2010 and will start to generate interest income in 2011. In comparison, during 2009, the interest income was derived from two TRT systems, two CHPG systems and one WGPG system.

Operating expenses consisted of selling, general and administrative expenses totaling $6.34 million for 2010 compared to $4.19 million for 2009, an increase of $2.15 million or 51%. The increase was due to proportional increases in our payroll, welfare and marketing expenses as a result of sales of the second 9MW capacity power station of Erdos Phase I project, Pucheng biomass power generation system, Zhongbao WHPG system, first and third 9MW recycling wasted heat power generation systems of Erdos Phase II project and continuous expansion of our business. In addition, we recorded $2.94 million in compensation expenses for stock options and warrants during 2010, compared to $1.79 million for 2009. We also recorded $0.60 million stock based compensation resulting from a lawsuit settlement with a consulting firm.

Our net income for 2010 was $16.03 million, compared to $9.71 million for 2009, an increase of $6.32 million or 65%. This increase in net income was mainly due to the sales of the second 9MW capacity WHPG system of Erdos Phase I, the first and third 9MW capacity WHPG Erdos Phase II, Pucheng 12MW biomass power generation system and Zhongbao 7MW capacity WHPG system, as well as increased interest income from lease payments for energy saving systems compared with 2009.

For the year ended December 31, 2010, GAAP diluted EPS was $0.33 with approximately 49,798,102 shares (weighted average) of common stock outstanding as compared with $0.21 in the same period of 2009 when the Company had 46,261,985 weighted average number of shares of common stock

As of December 31, 2010, the Company had cash and cash equivalents of $11.07 million, other current assets were $10.76 million and current liabilities were $27.11 million. Total investments in sales-type leases were $117.59 million, compared with $48.15 million as of the end of December 2009. Total shareholders' equity was $70.81 million, compared with $46.05 million at December 31, 2009.

Non-GAAP Financial Measures

We believe 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.

For the year ended December 30, 2010, Non-GAAP net income was $25.88 million, or non-GAAP diluted EPS of $0.52, compared with $13.59 million of Non-GAAP net income, or $0.29 in Non-GAAP diluted EPS for the same period ended in 2009.

Full Year 2010 Results Conference Call

The Company plans to host its full year 2010 results conference call today, April 1, 2011 at 9:00 a.m. ET. Investors are invited to participate on the live call by dialing (877) 407-0784, International investors should dial (201) 689-8560 both parties should reference event ID: 369973.  A replay of the call will be available for 1 week following the call. Domestic investors can dial (877) 870-5176 and International investors can call (858) 384-5517 both parties can enter pass code 369973.

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% 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.

SOURCE China Recycling Energy Corp.