Cleantech Solutions International Reports Third Quarter 2011 Results

Nov 14, 2011, 17:00 ET from Cleantech Solutions International, Inc.

WUXI, Jiangsu Province, China, Nov. 14, 2011 /PRNewswire-Asia-FirstCall/ -- Cleantech Solutions International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a manufacturer of metal components and assemblies, primarily used in the wind power, solar and other clean technology industries, today announced its financial results for the three and nine months ended September 30, 2011.

"We continue to face challenging market conditions and pricing environment, due to delayed capital expenditures by our wind power and other industrial customers in light of the PRC government's tightening monetary policy," commented Mr. Jianhua Wu, Chairman and Chief Executive Officer of China Wind Systems.

"We continue to make progress in diversifying our product offering and are optimistic about the evolution of our solar business. We are also gaining traction in other clean energy areas, recently receiving sample orders for key components for Sapphire Growth System used in the manufacture of LED general lighting applications. At quarter end, we had a backlog of $1.8 million in solar products and LED equipment and sample orders. We are confident our fabrication and welding expertise will allow us to further penetrate these and other areas of clean energy," Mr. Wu concluded.

Third Quarter 2011 Results

Revenue for the third quarter of 2011 declined 45.1% to $11.7 million, compared to $21.3 million for the same period of 2010. The decline in revenue was mainly attributable to a slowdown in sales and decreased selling prices of the Company's forged rolled rings and related products associated slower growth rate in the wind industry and increased competition. In addition, the dyeing and finishing equipment segment experienced a decline in sales largely due to the business cycle and customer delays in purchasing new equipment designed to meet the PRC government's mandatory environmental protection policies, due to monetary tightening policies implemented by the Chinese government.

Revenue from the sale of forged rolled rings to the wind power industry and other industries decreased 51.5% to $7.6 million, or 65.2% of revenue, compared to $15.7 million, or 73.9% of net revenue, in the same period last year.

Revenue from the sale of forged rolled rings exclusively to the wind power industry fell 63.9% to $4.5 million, representing 38.5% of revenue, compared to $12.4 million, or 58.4% of revenue, in the comparable period last year.  

Revenue from the sale of forged rolled rings to other industries decreased 4.9% to $3.1 million, or 26.7% of revenue, compared with $3.3 million for the comparable period of the prior year.  

Revenue from the Company's dyeing and finishing equipment segment decreased 26.8% to $4.1 million, or 34.8% of net revenues, compared to $5.6 million, or 26.1% of revenue, for the third quarter of 2010.

Gross profit for the third quarter of 2011 decreased 51.5% to $2.6 million, compared to $5.4 million for the same period in 2010. Gross margin decreased to 22.5% during the third quarter of 2011 compared to 25.5% for the same period a year ago. The slight increase in gross margin for the dyeing segment was offset by the decline in gross margin for the forged rolled rings and related products segment, which was largely due to an increase in the cost of raw materials, which could not be fully passed on to the Company's customers, and lower operational efficiencies as the Company operated at lower production levels.

Operating expenses decreased 22.3% to $1.0 million, compared to $1.3 million in the comparable period last year. The decrease was largely due to decrease in the Company's selling, general and administrative expenses, which decreased 24.2% year over year due to lower stock-based compensation expenses, lower shipping and travel costs due to lower sales and an adjustment to bad debt expense.

Operating income decreased 60.5% to $1.6 million, compared to $4.1 million for the same period of 2010. Operating margin was 14.0% compared to 19.5% in the third quarter last year.

Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measurement, was $2.8 million, compared to $5.1 million in the same quarter last year.

Net income decreased 61.8% to $1.1 million, compared to $3.0 million in the comparable period last year. Basic earnings per share in 2011 and 2010 were $0.06 and $0.16, respectively. Basic earnings per share were calculated using basic weighted average shares of 19,976,741 and 18,177,405 for the three months ended September 30, 2011 and 2010, respectively. Diluted earnings per share were $0.05, compared to $0.12 in the same period of 2010. Diluted earnings per share were calculated using diluted weighted average shares of 24,621,594 and 25,312,979 for the three months ended September 30, 2011 and June 30, 2010, respectively.

Results for Nine Months

For the nine months ended September 30, 2011, revenues decreased 26.7% to $41.9 million from $57.1 million in 2010. Gross profit decreased 30.9% to $10.2 million, compared to $14.8 million last year. Gross margin for the nine months ended September 30, 2011 was 24.5%, compared to 26.0% in 2010. Gross margin for the forged rolled rings segment was 25.7% compared to 27.9% in 2010. For the dyeing and finishing equipment segment, gross margin was 21.4% compared to 20.8% in 2010. Operating income decreased 37.2% to $7.0 million from $11.1 million in 2010. EBITDA was $10.8 million, compared to $13.3 million in the same period last year. Net income was $5.0 million, a 37.4% decrease from $7.9 million last year. Basic earnings per share for nine months ended September 30, 2011 and 2010 were $0.26 and $0.45, respectively. Diluted earnings per share were $0.20 and $0.32, respectively.

Financial Condition

As of September 30, 2011, Cleantech Solutions held cash and cash equivalents of $0.5 million, down from $0.9 million at December 31, 2010. Accounts receivable were $8.2 million and total current assets of $17.8 million. The Company had $2.3 million in short-term loans payable, no long-term debt and stockholders' equity stood at $70.6 million. In the nine months ended September 30, 2011, the Company generated $5.9 million in cash flow from operations.

The Company's planned capital expenditures for the next twelve months mainly relate to purchase of machinery for the manufacture of products for the solar industry and additional investment for its forged rolled rings and dying equipment segment. The Company plans to finance these expenditures with cash flow from operations.

Subsequent Events

On October 12, 2011, the Company renewed its loan agreement with Agricultural and commercial Bank in the amount of $468,618. The loan is due on August 31, 2012 with interest at the annual rate of 7.872% and secured by certain assets of the Company.

On November 4, 2011, the Company's board of directors approved for a one-for-five reverse split of its common stock and a reduction in the number of authorized shares of common stock. These changes will be reflected in an amendment to the Company's certificate of incorporation and are subject to stockholder approval. This action by the board of directors superseded previous authorization for a one-for-three reverse split.  

Business Outlook

Cleantech Solutions continues to implement its strategy of diversifying its businesses to other areas of clean energy to partially offset the recent decline in sales from the wind energy sector and other industrial customers. Despite the apparent decline in the growth rate for the wind power industry in China, the Company believes the wind power market still provides significant opportunity for growth over the next few years, supported by Chinese government targets for additional installed capacity of 90 GW by 2015. However, the Company is facing increased competition, which has affected its pricing, and it expects competition to continue to increase.  

The Company has a growing pipeline of customers from other clean technology application areas and has received positive feedback from end customers in the solar and LED general lighting industries. The Company is on schedule to complete and ship its LED sample products before the end of the year and anticipates follow-on orders in 2012. In addition, it also expects the airflow dyeing machines will gain traction in the coming months.

Mr. Wu concluded, "Our strategy remains unchanged as we continue to explore new markets in other clean technology industries given anticipated softness in the wind power and traditional dyeing equipment in the remainder of 2011. We will focus on seeking new customers and completing sample orders from our customers in the solar and LED general lighting industries, which will be important catalysts for the Company's revenue and profitability going forward."

Conference Call

Cleantech Solutions will conduct a conference call at 8:00 a.m. Eastern Time on Tuesday, November 15, 2011 to discuss results for the third quarter of fiscal 2011.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 759-2078. International callers should dial (706) 643-0585. When prompted, please enter conference passcode: 23292183.

If you are unable to participate in the conference call at this time, a replay will be available for 14 days starting on November 15, 2011 at 11:00 a.m. ET. To access the replay, dial (855) 859-2056. International callers dial (404) 537-3406, and enter passcode: 23292183.

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.

About Cleantech Solutions International

Cleantech Solutions is a manufacturer of metal components and assemblies, primarily used in clean technology industries. The Company supplies forging products, fabricated products and machining services to a range of clean technology customers, primarily in the wind power sector. Cleantech Solutions is committed to achieving long-term growth through ongoing technological improvement, capacity expansion, and the development of a strong customer base. The Company's website is

www.cleantechsolutionsinternational.com. Any information on the Company's website or any other website is not a part of this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. 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, including factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2010 and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended September 30, 2011. All forward-looking statements attributable to the Company or to 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.

Company Contact:

Mr. Fernando Liu

Chief Financial Officer

Cleantech Solutions International, Inc.

Tel: +86-137-6134-7367

Email: fol@cleantechsolutionsinternational.com

Web: www.cleantechsolutionsinternational.com

Investor Relations Contact:

Ms. Elaine Ketchmere

CCG Investor Relations

Tel: +1-310-954-1345

Email: elaine.ketchmere@ccgir.com

Web: www.ccgirasia.com

- Financial Tables Follow-

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

September 30, 2011

December 31, 2010

(Unaudited)

ASSETS

 

 

CURRENT ASSETS:

 

   Cash and cash equivalents

$                  518,274

$                947,177

   Restricted cash

468,618

-

   Notes receivable

150,230

50,593

   Accounts receivable, net of allowance for doubtful accounts

8,153,522

8,207,797

   Inventories, net of reserve for obsolete inventory

5,448,324

3,371,128

   Advances to suppliers

848,256

333,923

   Prepaid VAT on purchases

2,022,059

2,759,763

   Prepaid expenses and other

176,093

36,338

 

       Total Current Assets

17,785,376

15,706,719

 

PROPERTY AND EQUIPMENT - net

60,127,451

54,742,993

 

OTHER ASSETS:

 

  Deposit on equipment

781,030

-

  Land use rights, net

3,821,480

3,767,159

 

       Total Assets

$             82,515,337

$           74,216,871

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

CURRENT LIABILITIES:

 

   Short-term bank loans

$               2,343,091

$             1,814,937

   Bank acceptance notes payable

468,618

-

   Accounts payable

5,124,255

7,660,768

   Accrued expenses

599,634

526,006

   Capital lease obligations- current portion

242,850

-

   VAT and service taxes payable

-

81,614

   Advances from customers

2,113,577

236,004

   Income taxes payable

651,310

1,331,713

 

       Total Current Liabilities

11,543,335

11,651,042

 

OTHER LIABILITIES:

 

   Capital lease obligations- net of current portion

419,233

-

 

        Total Liabilities

11,962,568

11,651,042

 

STOCKHOLDERS' EQUITY:

 

   Preferred stock $0.001 par value (60,000,000 shares authorized, all of which  were designated

 

      as series A convertible preferred, 13,375,983 and 16,205,268 shares issued and outstanding

 

      at September 30, 2011 and December 31, 2010, respectively)

13,376

16,205

   Common stock ($0.001 par value; 150,000,000 shares authorized;

 

      20,168,813 and 18,751,128 shares issued and outstanding

 

      at September 30, 2011 and December 31, 2010, respectively)

20,169

18,751

   Additional paid-in capital

27,451,299

26,579,053

   Retained earnings

33,847,632

29,264,152

   Statutory reserve

2,044,826

1,658,197

   Accumulated other comprehensive gain - foreign currency translation adjustment

7,175,467

5,029,471

 

       Total Stockholders' Equity

70,552,769

62,565,829

 

       Total Liabilities and Stockholders' Equity

$             82,515,337

$           74,216,871

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

`

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2011

2010

2011

2010

REVENUES

$  11,676,696

$ 21,262,054

$ 41,851,257

$  57,080,010

COST OF REVENUES

9,046,015

15,840,889

31,617,025

42,264,893

GROSS PROFIT

2,630,681

5,421,165

10,234,232

14,815,117

OPERATING EXPENSES:

    Depreciation

84,531

78,478

505,326

239,493

    Selling, general and administrative

913,198

1,206,058

2,773,694

3,502,239

       Total Operating Expenses

997,729

1,284,536

3,279,020

3,741,732

INCOME FROM OPERATIONS

1,632,952

4,136,629

6,955,212

11,073,385

OTHER INCOME (EXPENSE):

    Interest income

110

490

940

3,212

    Interest expense

(60,452)

(23,923)

(122,980)

(117,336)

    Foreign currency loss

(1,476)

(6,172)

(4,817)

(13,073)

    Grant income

-

132

-

49,278

    Other income

14,266

-

91,379

-

       Total Other Income (Expense)

(47,552)

(29,473)

(35,478)

(77,919)

INCOME BEFORE INCOME TAXES

1,585,400

4,107,156

6,919,734

10,995,466

INCOME TAXES

450,410

1,133,566

1,949,625

3,051,682

NET INCOME

$   1,134,990

$   2,973,590

$   4,970,109

$   7,943,784

COMPREHENSIVE INCOME:

     NET INCOME

$   1,134,990

$   2,973,590

$   4,970,109

$   7,943,784

     OTHER COMPREHENSIVE INCOME:

          Unrealized foreign currency translation gain

655,213

908,803

2,145,996

1,124,886

     COMPREHENSIVE INCOME

$   1,790,203

$   3,882,393

$   7,116,105

$   9,068,670

NET INCOME PER COMMON SHARE:

   Basic

$           0.06

$           0.16

$           0.26

$           0.45

   Diluted

$           0.05

$           0.12

$           0.20

$           0.32

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

   Basic

19,976,741

18,177,405

19,370,281

17,671,530

   Diluted

24,621,594

25,312,979

25,126,373

24,904,210

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

 

 

September 30,

 

 

 

 

 

2011

 

2010

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$               4,970,109

 

$                 7,943,784

 

Adjustments to reconcile net income from operations to net cash

 

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

 

Depreciation

 

3,651,168

 

2,145,463

 

 

Amortization of debt discount to interest expense

 

-

 

44,993

 

 

Amortization of land use rights

 

68,145

 

65,042

 

 

Increase in allowance for doubtful accounts

 

389,120

 

550,006

 

 

Stock-based compensation expense

 

282,259

 

478,390

 

Changes in assets and liabilities:

 

 

 

 

 

 

Notes receivable

 

(96,409)

 

(16,598)

 

 

Accounts receivable

 

(70,783)

 

(2,966,377)

 

 

Inventories

 

(1,935,112)

 

(1,918,385)

 

 

Prepaid value-added taxes on purchases

 

814,967

 

(1,564,513)

 

 

Prepaid and other current assets

 

(48,340)

 

174,823

 

 

Advances to suppliers

 

(495,317)

 

(1,028,678)

 

 

Accounts payable

 

(2,741,480)

 

3,345,974

 

 

Accrued expenses

 

58,098

 

(212,262)

 

 

VAT and service taxes payable

 

(82,941)

 

62,311

 

 

Income taxes payable

 

(712,490)

 

148,220

 

 

Advances from customers

 

1,839,882

 

89,848

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

5,890,876

 

7,342,041

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Payments for deposit on equipment

 

(768,520)

 

-

 

 

Purchase of property and equipment

 

(6,413,874)

 

(9,212,125)

 

 

 

 

 

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

 

(7,182,394)

 

(9,212,125)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Principal payments on capital lease

 

(143,545)

 

-

 

 

Proceeds from loans payable

 

2,612,969

 

1,320,345

 

 

Repayment of loans payable

 

(2,151,857)

 

(2,090,460)

 

 

Increase in restricted cash

 

(461,112)

 

-

 

 

Increase in bank acceptance notes payable

 

461,112

 

-

 

 

Proceeds from sale of preferred stock, net

 

125,000

 

-

 

 

Proceeds from exercise of warrants

 

400,000

 

2,100,000

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

842,567

 

1,329,885

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

 

20,048

 

35,270

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(428,903)

 

(504,929)

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - beginning of year

 

947,177

 

2,278,638

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - end of period

 

$                  518,274

 

$                 1,773,709

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest

 

$                  122,980

 

$                     74,486

 

 

 

Income taxes

 

$               2,662,115

 

$                 2,903,462

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

Security deposit and leased property in exchange for capital lease obligations

 

$                  795,022

 

$                             -

 

Series A preferred converted to common shares

 

$                     3,536

 

$                       2,911

 

Common stock issued for future service

 

$                    63,576

 

$                       3,900

Reconciliation of Net Income to EBITDA (Amounts expressed in US$)

 

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

 

2011

2010

2011

2010

 

 

 

 

Net Income

$     1,134,990

$     2,973,590

$     4,970,109

$     7,943,784

Income Tax

$        450,410

$     1,133,566

$     1,949,625

$     3,051,682

Interest expense, net

$         (60,342)

$         (23,433)

$       (122,040)

$       (114,124)

Depreciation and Amortization

$     1,170,416

$        923,024

$     3,719,313

$     2,210,505

EBITDA

$     2,816,158

$     5,053,613

$  10,761,087

$   13,320,095

SOURCE Cleantech Solutions International, Inc.



RELATED LINKS

www.cleantechsolutionsinternational.com