Sino Clean Energy, Inc. Announces Record 2009 Financial Results; Increases Full Year 2010 Guidance
XI'AN, China, April 9 /PRNewswire-Asia-FirstCall/ --
- Company exceeded revenue and net income guidance for full-year 2009
- Full-year 2009 revenue increased 222.8% to $46.0 million; adjusted net
income increased 173.9% to $11.0 million, with adjusted EPS of $0.11
- Company increased full-year 2010 revenue and net income guidance to
$105 million and $25.0 million, respectively
- Management to host Earnings Conference Call on Friday, April 9, 2010 at
10:00 a.m. EDT
Sino Clean Energy, Inc. (OTC Bulletin Board: SCLX; "Sino Clean Energy," or the "Company"), a leading producer and distributor of coal-water slurry fuel ("CWSF") in the People's Republic of China ("China"), today announced the Company's financial results for the year ended December 31, 2009, and increased revenue and net income guidance for the full-year 2010.
Full-year 2009 Results (USD)
(years ended December 31,2009) 2009 2008 CHANGE
Revenue $46.0 million $14.3 million +222.8%
Gross Profit $17.1 million $5.0 million +242.7%
GAAP Net Income (Loss) ($34.8 million) $3.4 million --
Adjusted Net Income $11.0 million* $4.0 million** +173.9%
GAAP EPS (Basic and Diluted) ($0.36) $0.03 --
Adjusted EPS (Basic and
Diluted) $0.11* $0.03** +266.7%
* Excludes non-cash charges of $12.8 million related to the changes in fair value of warrants and embedded beneficial conversion feature, $25.0 million from the stock-based cost of the Company's private placement in July 2009, and $11.1 million related to the shares of common stock placed in escrow in connection with the Company's September 2008 financing.
**Excludes a non-cash charge of $0.7 million in Q4 2008 related to the shares of common stock placed in escrow in connection with the Company's September 2008 financing.
Please note: For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.
Full-year 2009 Financial Results
Revenue - Revenue for the year ended December 31, 2009 increased 222.8% to $46.0 million from $14.3 million in the year ended December 31, 2008. The significant increase is primarily attributable to increased production resulting from the addition in 2009 of a two new production lines, which led to an increase in sales from new and existing customers. The Company's annual production capacity at year-end 2009 was 650,000 metric tons following the commencement of the two new CWSF production lines, which increased annual output capacity by 550,000 metric tons. As of December 31, 2009, Sino Clean Energy had 30 customers under CWSF supply agreements totaling approximately 600,000 metric tons per year, compared to 27 customers totaling approximately 400,000 metric tons of CWSF per year at December 31, 2008.
Cost of Goods Sold - Cost of Goods Sold was $28.9 million for the year ended December 31, 2009, compared to $9.3 million for the year ended December 31, 2008, representing an increase of 212.1%. The increase in cost of goods sold is approximately proportional with the increase in sales.
Gross Profit and Gross Profit Margin -- Gross profit increased 242.7% to $17.1 million in 2009 from $5.0 million in 2008, as gross profit margin improved to 37.1% in 2009 from 35.0% in 2008 as a result of better pricing for CWSF. As a result of the new production line added in 2009, depreciation of plant and machinery for 2009 was $1.5 million as compared to $0.3 million in 2008.
Operating Expenses -- Operating expenses for the year ended December 31, 2009 were approximately $2.9 million, up 414.5% from $0.6 million for the year ended December 31, 2008. Selling expenses totaled $1.1 million for 2009, as compared to approximately $13,000 for 2008. The increase was mainly in transportation cost which amounted to $1.1 million due to the growth of the Company's business in 2009. General and administrative expenses totaled $1.8 million for 2009, as compared to $0.6 million for 2008, an increase of 223.7% due primarily to the expansion of the Company's operations.
Income from Operations -- Income from operations in 2009 increased 220.6% to $14.2 million from $4.4 million in 2008, with operating margins of 30.8% compared to 31.0% in the respective periods.
Net Income -- For the year ended December 31, 2009, the Company reported a net loss of $34.8 million compared to net income of $3.0 million for the year ended December 31, 2008, with a corresponding net loss per share of $0.36 compared to net income per share of $0.03 based on 97.9 million and 88.2 million shares, respectively. The decrease in net income is primarily attributable to incurrence of stock-based cost of the Company's private placement in July 2009, changes in the fair value and extinguishment of certain derivative liabilities, and expenses related to the shares of common stock held by the Company's Chief Executive Officer and placed in escrow in connection with the Company's September 2008 financing transaction. Results for 2008 included expenses related to the shares of common stock held by the Company's Chief Executive Officer and placed in escrow in connection with the Company's September 2008 financing transaction. Excluding these items, adjusted net income for 2009 and 2008 would have been $11.0 million and $4.0 million, respectively, with corresponding adjusted net income per share of $0.11 and $0.03 based on 97.9 million and 88.2 million shares, respectively. (See "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" table below.)
"We are pleased to have exceeded both revenue and net income guidance for 2009, and expect sales of our coal water slurry fuel to continue to increase during 2010 due to our increased production capacity, expanded customer base, current order rates and growing demand for clean energy in China," stated Baowen Ren, Chairman of Sino Clean Energy. "Our total production capacity today is 850,000 metric tons following the recent addition of 200,000 metric tons at our existing facility located in Tongchuan, Shaanxi province. Currently, we have 35 customers under CWSF supply agreements totaling approximately 800,000 metric tons per year. We are negotiating with 15 potential customers for supply agreements which could represent up to 500,000 metric tons of CWSF and plan to expand our production capacity to 1,050,000 metric tons by the end of 2010. The CWSF market continues to expand due to growing customer demand for clean and efficient sources of energy and the government's mandate for reduced emissions through improved utilization of coal. We believe that CWSF is an ideal alternative for addressing China's pollution problem while meeting its growing energy requirements. CWSF increases burning efficiency and reduces air pollution, coal consumption and coal material costs for end users while generating attractive gross profit margins for energy producers. As a result, we believe we are well-positioned to further gain market share as a leading producer of CWSF in China."
Liquidity and Capital Resources
Cash and cash equivalents were $18.3 million at December 31, 2009 compared to $3.9 million at December 31, 2008. For 2009, the Company generated $9.7 million in net cash flow from operations, compared to $4.7 million in 2008. The Company had working capital of $7.7 million at December 31, 2009 and a current ratio of .37-to-1. Inventories were $0.9 million and the accounts receivable balance was $3.7 million at December 31, 2009, compared to approximately $45,000 and $0.9 million respectively at December 31, 2008. The annualized days sales outstanding for the fourth quarter of 2009 were 31 days.
Financial Outlook for 2010
For the year ending December 31, 2010, management increased guidance and now expects revenues of at least $105 million in revenues and adjusted net income of at least $25 million, representing an increase of approximately 128.3% and 127.3% compared to 2009 revenues and adjusted net income, respectively. This guidance assumes total sales volume of 850,000 metric tons of CWSF in 2010. The Company expects to end 2010 with 1,050,000 metric tons of total CWSF production capacity.
Government Support in China
China is the world's largest producer and consumer of coal and is also one of the world's leading emitters of greenhouse gas (GHG). Approximately 70% of China's energy comes from coal, the greatest part of which is burned in older, inefficient power plants that are primary contributors to GHG. To address environmental concerns from the use of coal, the Chinese central government formulated the "9th Five-Year Plan for Clean Coal Technology in China and a Development Program to 2010" in 1995, which emphasized the need to strengthen research and development of clean coal technologies and to promote commercialization of proven clean coal technologies including CWSF. The China State Environmental Protection Agency (SEPA) states that over $190 billion will be spent by industrial companies for environmental cleanup as part of the 11th Five Year Plan (2006-2010).
Conference Call
The conference call will take place at 10:00 a.m. ET on Friday, April 9, 2010. Interested participants should call 1-877-941-4774 when calling within the United States or 1-480-629-9760 when calling internationally.
A playback will be available through April 16, 2010. To listen, please call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4281232 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=0000731E, or visiting ViaVid's website at http://www.viavid.net, where the webcast can be accessed through April 16, 2010.
About Sino Clean Energy
Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water slurry fuel ("CWSF"). With locations in Shaanxi Province and Liaoning Province, Sino Clean Energy is the largest CWSF producer in Northwestern China with 850,000 metric tons of total annual capacity. For more information about Sino Clean Energy, please visit http://www.sinocei.net/ .
About Non-GAAP Financial Measures
The following table excludes from net income (loss) certain items related to the cost of escrow shares put in escrow by the Company's chairman as a guarantee on the issuance of Sino Clean Energy's convertible notes, the cost related to the issuance of the Company's private placement (primarily related to the fair value of the derivatives created upon issuance related to the conversion feature of the notes and the fair value of the warrants issued to the convertible note holders), the change in fair value of these derivatives during the period as well as the extinguishment of a portion of the derivative upon conversion of the notes, and amortization of the valuation discount recorded as interest expense relating to these convertible notes. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of Sino Clean Energy. Accordingly, management excludes these items when making operational decisions. The Company believes that providing to its investors the non-GAAP measures that management uses is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
2009 2008
GAAP Net (loss) income $(34,736,689) $3,351,454
Non-GAAP adjustment
Expense related to escrow shares 11,125,071 676,466
Extinguishment of derivative liability (7,046,556) 0
Change in fair value of warrants and embedded 12,770,113 0
conversion feature
Cost of private placement 24,977,114 0
Amortization of notes discount 3,942,185 0
Adjusted Net income $11,031,238 $4,027,920
Safe Harbor Statement
This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to uncertainties in product demand, the impact of competitive products and pricing, our ability to obtain regulatory approvals, changing economic conditions around the world, release and sales of new products and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For further information please contact:
Company:
Ming Lee
Assistant to the Chairman
Tel: +86-29-8406-7376 (China)
Email: [email protected]
Investor Relations:
HC International, Inc.
Ted Haberfield, Executive VP
Tel: +1-760-755-2716
Email: [email protected]
Web: http://www.hcinternational.net
FINANCIAL TABLES FOLLOW
Sino Clean Energy Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts expressed in U.S. Dollars)
ASSETS
Pro Forma
December 31, December 31, December 31,
2009 2009 2008
(Unaudited)
Current assets
Cash and cash equivalents $18,302,558 $18,302,558 $3,914,306
Accounts receivable, net 3,655,473 3,655,473 899,629
Inventories 892,609 892,609 45,068
Prepaid inventories 5,453,095 5,453,095 1,996,584
Prepaid expenses 259,627 259,627 86,958
Refundable advance -- -- 731,861
Government grant receivable -- -- 146,314
Other receivables 65,584 65,584 16,986
Tax recoverable 138,495 138,495 --
Prepaid land use right -
current portion 38,739 38,739 38,703
Total current assets 28,806,180 28,806,180 7,876,409
Property, plant and
equipment, net 12,557,691 12,557,691 9,394,416
Land use right - non
current portion 1,778,562 1,778,562 1,804,277
Prepayments and deposits 729,328 729,328 994,395
Goodwill 762,018 762,018 762,018
Deferred debt issuance cost -- -- 274,278
Total assets $44,633,779 $44,633,779 $21,105,793
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities
Convertible notes net
of discount $-- $-- $383,490
Accounts payable and
accrued expenses 2,672,211 2,672,211 1,004,999
Taxes payable 1,577,249 1,577,249 305,903
Amount due to directors 73,466 73,466 465,049
Derivative liabilities 16,752,858 16,752,858 --
Total current liabilities 21,075,784 21,075,784 2,159,441
Convertible notes, net of
discount -- 1,615,025 --
Derivative liabilities -- 28,404,181 --
Total liabilities 21,075,784 51,094,990 2,159,441
Commitments and Contingencies
Shareholders' Equity Deficiency)
Preferred stock, $0.001 par
value, 50,000,000 shares
authorized, none issued and
outstanding -- -- --
Common stock, $0.001 par
value, 300,000,000 shares
authorized, 108,498,625 and
92,181,750 issued and
outstanding as of December 31,
2009 and 2008 respectively,
and 162,272,309 as of
December 31, 2009 on
proforma basis 162,273 108,499 92,182
Additional paid-in capital 35,498,381 25,335,155 12,696,549
(Accumulated deficit)
Retained earnings (16,000,781) (35,802,987) 3,686,087
Statutory reserves 1,758,553 1,758,553 348,309
Accumulated other
comprehensive income 2,139,569 2,139,569 2,123,225
Total shareholders' equity
(Deficiency) 23,557,995 (6,461,211) 18,946,352
Total liabilities and
shareholders' equity $44,633,779 $44,633,779 $21,105,793
As of December 31, 2009, the Company had outstanding $10,217,000 of
its 10% Senior Secured Convertible Notes. Subsequent to December 31,
2009, and by March 5, 2010, all the convertible notes holders
converted these notes into 53,773,684 shares of common stock of the
Company pursuant to the original Securities Purchase Agreement and
Form of Note. As of December 31, 2009, the Company had reflected a
valuation discount of $8,601,975 against these convertible notes
payable, and had recorded a derivative liability of $28,404,181
relating to the fair value of the conversion feature of these notes.
The unamortized portion of the valuation discount will be treated as
additional interest expense on the date of conversion, and the fair
value of the derivative liability will be recognized as a gain on
extinguishment on the date of conversion. The effects of the above
conversion and extinguishment of the derivative liability on the
recorded assets, liabilities and shareholders equity of the Company as
if the conversion had occurred on December 31, 2009 are reflected in
the "pro forma" column in the accompanying balance sheet.
Sino Clean Energy Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Income (Loss)
For the years ended December 31, 2009 and 2008
(Amounts expressed in U.S. Dollars)
Years Ended December 31,
2009 2008
Revenue $46,012,353 $14,253,989
Cost of goods sold (28,922,846) (9,266,832)
Gross profit 17,089,507 4,987,157
Selling expenses 1,125,884 13,128
General and administrative
expenses 1,796,032 554,766
Income from operations 14,167,591 4,419,263
Other income (expenses)
Interest expense (4,937,441) (566,752)
Expense related to escrow shares (11,125,071) (676,466)
Rental income, net of outgoings -- 78,691
Interest income 43,285 27,397
Extinguishment of derivative
liability 7,046,556 --
Change in fair value of
derivative liabilities (12,770,113) --
Cost of private placement (24,977,114) --
Sundry income (expenses) (29,293) --
Gain on disposal of property -- 33,069
Government grant -- 141,501
Total other income (expenses) (46,749,191) (962,560)
(Loss) Income before provision
for income taxes (32,581,600) 3,456,703
Provision for income taxes 2,243,088 105,249
Net (loss) income (34,824,688) 3,351,454
Net income allocated to non-
controlling interest -- (351,849)
Net (loss) income allocated to
Sino Clean Energy, Inc. (34,824,688) 2,999,605
Other comprehensive (loss) income
Foreign currency translation
adjustment 16,344 962,127
Comprehensive (loss) income $(34,808,344) $3,961,732
Weight average number of shares
-Basic 97,929,217 87,169,614
-Diluted 97,929,217 88,162,076
(Loss) Income per common share
- Basic $(0.36) $0.03
- Diluted $(0.36) $0.03
Sino-Clean Energy, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
For the years ended December 31, 2009 and 2008
Additional
Common Stock paid-in Statutory
Share Amount capital reserve
Balance, January 1, 2008 84,681,750 $84,682 $9,153,174 $348,309
Fair value of shares
issued for acquisition
of minority interest 7,500,000 7,500 1,492,500 --
Fair value of warrant
issued for debt
issuance fee -- -- 30,759 --
Fair value of warrant
issued with
convertible notes -- -- 1,335,650 --
Expense related to
escrow shares -- -- 676,466 --
Fair value of vested
stock options -- -- 8,000 --
Foreign currency
translation gain -- -- -- --
Net income -- -- -- --
Balance, December
31, 2008 92,181,750 92,182 12,696,549 348,309
Reclassification of
warrants and conversion
feature to derivative
liability -- -- (1,335,650) --
Balance, January 1, 2009
as adjusted 92,181,750 92,182 11,360,899 348,309
Fair value of shares
issued for service 2,333,000 2,333 452,602 --
Common stock issued upon
conversion of convertible
notes and accrued
interest 13,983,875 13,984 2,396,583 --
Expense related to
escrow shares -- -- 11,125,071 --
Net loss -- -- -- 1,410,244
Foreign currency
translation gain -- -- -- --
Balance, December
31, 2009 108,498,625 $108,499 $25,335,155 $1,758,553
Sino-Clean Energy, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
For the years ended December 31, 2009 and 2008
Accumulated
other
Retained comprehensive
earnings income Total
Balance, January 1, 2008 $686,482 $1,161,098 $11,433,745
Fair value of shares issued
for acquisition of
minority interest -- -- 1,500,000
Fair value of warrant issued
for debt issuance fee -- -- 30,759
Fair value of warrant issued
with convertible notes -- -- 1,335,650
Expense related to escrow shares -- -- 676,466
Fair value of vested stock options -- -- 8,000
Foreign currency translation gain -- 962,127 962,127
Net income 2,999,605 -- 2,999,605
Balance, December 31, 2008 3,686,087 2,123,225 18,946,352
Reclassification of warrants
and conversion feature to
derivative liability (3,254,142) -- (4,589,792)
Balance, January 1, 2009
as adjusted 431,945 2,123,225 14,356,560
Fair value of shares issued
for service -- -- 454,935
Common stock issued upon
conversion of convertible
notes and accrued interest -- -- 2,410,567
Expense related to escrow shares -- -- 11,125,071
Net loss (36,234,932) -- (34,824,688)
Foreign currency
translation gain -- 16,344 16,344
Balance, December 31, 2009 $(35,802,987) $2,139,569 $(6,461,211)
Sino Clean Energy Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2009 and 2008
(Amounts expressed in U.S. Dollars)
Year ended December 31,
2009 2008
Cash flows from operating activities:
Net income (loss) $(34,824,688) $3,351,454
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation & amortization 1,530,238 253,826
Amortization of discount on
convertible notes 3,942,185 383,490
Amortization of deferred debt
issuance costs 274,278 114,234
Fair value of vested stock options -- 8,000
Gain on sale of leasehold -- (33,069)
Fair value of shares issued for services 454,935 --
Expense related to escrow shares 11,125,071 676,466
Cost of private placement 24,977,114 --
Change in fair value of
derivative liabilities 12,770,113
Extinguishment of derivative liability (7,046,556) --
Change in operating assets and liabilities:
Accounts receivable (2,755,844) 233,367
Receipt of government grants 146,314 264,686
Inventories (847,541) (1,282)
Prepaid inventories (3,456,511) --
Prepaid expenses (172,669) (1,059,963)
Refundable advance 731,861 --
Other receivables (48,598) 154,861
Tax recoverable (138,495) --
Accounts payable and accrued expenses 1,759,335 27,822
Taxes payable 1,271,346 161,226
Assets on discontinued operation
Other receivables -- 141,795
Net cash provided by operating activities 9,691,888 4,676,913
Cash flows from investing activities:
Prepayments and deposits 265,067 --
Proceeds from sale of leasehold -- 1,024,465
Purchase of property, plant and equipment (4,654,910) (6,225,019)
Net cash used in investing activities (4,389,843) (5,200,554)
Cash flows from financing activities:
Repayment of amount due to a director (391,583) --
Repayment from a director -- 370,478
Advance from a director -- 70,000
Deferred debt issuance costs -- (357,753)
Proceeds from issuance of convertible notes 9,874,370 1,335,650
Payment of convertible notes (400,000) --
Net cash provided by financing activities 9,082,787 1,418,375
Effect of foreign currency translation 3,420 187,440
Net increase (decrease) in cash
and cash equivalents 14,388,252 1,082,174
Cash and cash equivalents,
beginning of year 3,914,306 2,832,132
Cash and cash equivalents, end of year $18,302,558 $3,914,306
Supplemental Disclosure Information
Interest paid $640,406 $--
Income taxes paid 1,161,346 24,760
Supplemental non-cash investing
and financing activities
Conversion of convertible notes and
accrued interest into common stock 2,410,567 --
Allocation of derivative liability
to note discount 11,592,000 --
Cumulative effect of change in accounting
principle upon adoption of new accounting
pronouncement on January 1,2009,
reclassification of warrants and conversion
feature to derivative liability 4,589,792 --
Fair value of warrants and beneficial
conversion feature related to issuance
of convertible notes -- 1,335,650
Fair value of warrant issued for
debt issuance fee -- 30,759
Issuance of common stock for
minority interest -- 1,500,000
SOURCE Sino Clean Energy, Inc.
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