2008-08-13 15:01:00
- Closes The Quarter with 32 CNG Filling Stations -
NEW YORK, Aug. 13 /EMWNews/ -- China Natural Gas, Inc.
(OTC Bulletin Board: CHNG), one of the leading providers of pipeline
natural gas for industrial, commercial and residential use and compressed
natural gas (CNG) for vehicular fuel in Xi'an, China, today announced its
second quarter financial results for the period ended June 30, 2008.
Financial Highlights for the Second Quarter 2008:
-- Revenue increased 104.2% year over year to $16.9 million
-- Gross profit increased 85.0% year over year to $7.7 million
-- Income from operations increased 58.0% year over year to $5.1 million
-- Non-GAAP net income of $3.8 million, or $0.13 per diluted share
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, stated, "We are
pleased to share our second quarter results with our investors. In the
second quarter, we continued to expand our CNG filling station network. As
of June 30, 2008, we had a total of 32 stations, 20 of which are located in
Shaanxi Province, and 12 in Henan Province. We also added an additional
1,698 residential, industrial and commercial pipeline customers compared to
the first quarter of 2008. We believe that the recent NDRC adjustment to
retail gasoline and diesel prices will benefit our auto conversion business
and support our overall long-term growth."
Mr. Ji continued, "The construction of our LNG plant is progressing on
schedule. During the second quarter, we invested approximately $3.4 million
in our LNG-related facilities, $2.7 million of which were used for the
purchase of equipment and the remainder used for investment in
infrastructure related to our LNG plant, located in Yulin, Shaanxi
Province. This also brings our total investment in the LNG business to
approximately $17.0 million and we expect to invest another $5.0 million in
the LNG facilities in the third quarter. We are also working diligently to
improve our corporate governance structure. We believe our new directors
will provide us with valuable guidance in both our governance system and
future business strategies as we continue to expand."
Revenue for the second quarter was $16.9 million, an increase of $8.6
million, or 104.2% compared with $8.3 million in the second quarter of
2007. The significant increase in revenue was due primarily to an
additional 15 CNG filling stations and a year over year increase in
residential, industrial and commercial pipeline customers to 91,967 from
78,216 in the second quarter of 2007.
Revenue from sales of natural gas increased 103.9% to $13.8 million
from $6.8 million in the prior year's period and contributed approximately
81.7% of revenue performance in the second quarter of 2008. Natural gas
sales, as a percentage of revenue, remained constant at approximately
81.7%, compared with 81.8% in the second quarter of 2007. Revenue from
installation and other businesses increased 105.3% to $3.1 million from
$1.5 million in the second quarter of 2007, or 18.3% of total revenue.
Gross profit increased 85.0% to $7.7 million in the second quarter of
2008 from $4.1 million in the second quarter of 2007. Gross margin was
45.4% in the second quarter of 2008, compared with 43.4% in the first
quarter of 2008 and 50.1% in the prior year's period. Gross margin
performance reflects the increases in revenue from Company-owned CNG
filling stations in the Henan Province, which generated a lower gross
margin than those in Xi'an, Shaanxi Province.
In the second quarter of 2008, operating income increased 58.0% to $5.1
million from $3.2 million in the second quarter of 2007. Operating expenses
in the second quarter of 2008 increased 176.5% to $2.6 million from
$943,306 the year before. This increase reflected larger business
operations with a total of 32 CNG filling stations during the second
quarter of 2008, as well as continued expenses related to the
identification of future natural gas filling station locations and costs
associated with the government licensing and approval processes. Operating
margin was 29.9% in the second quarter of 2008, compared to 27.1% in the
first quarter of 2008 and 38.7% in the prior year's period, reflecting
lower margin of the natural gas sold in Henan Province, as well as higher
operating expenses associated with a larger sales force, the purchase of
tankers and higher utilities expense.
During the first quarter of 2008, the Company began to recognize
non-cash non-operating expenses for the amortization of debt discount and
deferred offering costs related to the 5.0% Guaranteed Senior Notes
("Notes") issued to Abax Lotus in January and March 2008. In the second
quarter of 2008, these non-cash non-operating expenses were approximately
$379,000, or $0.01 per diluted share.
Net income for the second quarter of 2008 was $3.5 million, or $0.12
per diluted share. Excluding the impact of the non-cash expenses explained
above, net income would have been $3.8 million or $0.13 per diluted share,
compared with $2.7 million, or $0.11 per diluted share, in the second
quarter of 2007. (Please refer to the non-GAAP reconciliation table
included in this press release)
Balance Sheet
As of June 30, 2008, the Company had $29.2 million in cash and cash
equivalents on hand, compared with $41.3 million as of March 31, 2008 and
$13.3 million as of December 31, 2007.
Guidance
For the fiscal year 2008, the Company continues to anticipate revenue
and net income growth of at least 70%. Please note that this financial
guidance excludes the impact of interest charges, amortization and other
costs associated with the Company's 5.0% Guaranteed Senior Notes due 2014
in an aggregate principal amount of $40 million and warrants representing
the right to purchase 2,900,000 shares of the Company's common stock to
Abax Lotus Ltd.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings
that exclude the effect of non-cash non-operating expense of $379,132
related to the Senior Notes issued in January and March 2008. China Natural
Gas' management uses those non-GAAP financial measures when it internally
evaluates the performance of business and makes operating decisions,
including internal budgeting and performance measurement. China Natural Gas
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 China Natural Gas' financial performance in
comparison to historical periods, and it allows investors to evaluate China
Natural Gas' performance using the same methodology and information as that
used by China Natural Gas' 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.
The following table provides the non-GAAP financial measure and the
related GAAP measure and provides a reconciliation of the non-GAAP measure
to the equivalent GAAP measure.
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007
(Unaudited)
Three months ended
June 30
2008 2007
GAAP Net income 3,512,892 2,745,009
Add:
Amortization of discount on
senior notes (after tax effect) 251,137 -
Amortization of deferred
offering costs (after tax effect) 53,246 -
Adjusted Net Income (Excludes all
non-cash items) 3,817,275 2,745,009
*Assume an effective tax rate of 19.72%
Weighted average shares outstanding
Basic 29,200,304 24,210,183
Diluted 29,323,495 24,210,183
GAAP Basic EPS $ 0.12 0.11
Add:
Amortization of discount on
senior notes 0.0086 -
Amortization of deferred
offering costs 0.0018 -
Adjusted Basic EPS $ 0.13 0.11
GAAP Diluted EPS $ 0.12 0.11
Add:
Amortization of discount on
senior notes 0.0086 -
Amortization of deferred
offering costs 0.0018 -
Adjusted Diluted EPS $ 0.13 0.11
About China Natural Gas, Inc.
China Natural Gas, Inc., ("CHNG"), is the first China-based natural gas
retailing company publicly traded in the U.S. It currently owns and
operates a network of CNG retail filling stations as well as a 120
kilometer long compressed natural gas pipeline in Xi'an, China. Xi'an is a
fast growing Chinese city supported by a population of approximately eight
million and is the "gateway" to the broad Western regions of China. CHNG
currently retails natural gas at company-owned filling stations, delivers
natural gas services to residential, commercial and industrial customers,
and converts gasoline- fueled vehicles to hybrid (natural gas/gasoline)
powered vehicles. Currently it is estimated that there are 5,000 buses and
20,000 taxis using CNG in Xi'an.
This press release contains forward-looking statements regarding
revenue and net income growth and our LNG processing and distribution
plant. Words such as "anticipates," "expects," "intends," "plans,"
"targets," "projects," "believes," "seeks," "estimates" and similar
expressions are intended to identify such forward-looking statements. These
statements are based on the current expectations or beliefs of China
Natural Gas, Inc. management; are not guarantees of future performance; are
difficult to predict and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from
those described in the forward-looking statements, including the
fluctuation of natural gas prices, demand for natural gas, the availability
of natural gas supplies, changes in governmental regulations and/or
economic policies, civil unrest, weather and general economic conditions.
You should not place undue reliance on these forward-looking statements,
which speak only as of the date of this press release. Unless legally
required, CHNG undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
CONTACT
In the U.S.:
Ashley Ammon MacFarlane or Wei-Jung Yang
ICR, Inc.
203-682-8200
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2008 and DECEMBER 31, 2007
June 30, December 31,
2008 2007
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 29,180,315 $ 13,291,729
Short-term investments - 238,554
Accounts receivable 854,537 306,179
Other receivable 480,690 549,820
Inventories 523,027 231,339
Advances 993,348 663,041
Prepaid expense and other current
assets 771,327 109,722
Loan receivable 291,800 274,200
Total current assets 33,095,044 15,664,584
PROPERTY AND EQUIPMENT, net 45,581,330 32,291,995
CONSTRUCTION IN PROGRESS 15,537,703 2,210,367
FINANCING COSTS 1,951,746 -
OTHER ASSETS 7,030,886 3,123,052
TOTAL ASSETS $103,196,709 $ 53,289,998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 365,561 $ 293,970
Other payables 68,458 249,719
Accrued expense 141,170 -
Unearned revenue 893,960 327,220
Accrued interest 741,667 -
Taxes payable 1,732,193 1,211,775
Total current liabilities 3,943,009 2,082,684
LONG-TERM LIABILITIES:
Notes payable, net of $16,693,697
discount 23,306,303 -
Derivative liabilities - warrants 17,500,000 -
Total long-term liabilities 40,806,303 -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per share;
authorized 5,000,000 shares; none
issued - -
Common stock, $0.0001 per share;
45,000,000 authorized shares
29,200,304 shares issued and
outstanding at June 30, 2008
and December 31, 2007 2,920 2,920
Additional paid-in capital 32,085,775 32,046,879
Stockholder receivable (2,918,000) -
Cumulative translation adjustment 7,274,749 3,477,025
Statutory reserves 2,654,063 1,802,735
Retained earnings 19,347,890 13,877,755
Total stockholders' equity 58,447,397 51,207,314
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $103,196,709 $53,289,998
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Unaudited)
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
Revenue
Natural gas revenue $ 13,794,866 $ 6,765,265 $ 25,140,185 $ 11,688,837
Installation and
other 3,095,620 1,508,044 5,775,975 3,328,048
Total revenue 16,890,486 8,273,309 30,916,160 15,016,885
Cost of revenue
Natural gas cost 7,214,469 3,463,242 13,396,743 5,955,893
Installation and
other 2,010,254 666,957 3,765,178 1,400,523
Total cost of
revenue 9,224,723 4,130,199 17,161,921 7,356,416
Gross profit 7,665,763 4,143,110 13,754,239 7,660,469
Operating expenses
Selling 1,568,674 682,423 2,910,288 1,276,552
General and
administrative 1,040,000 260,883 1,979,325 682,262
Total operating
expenses 2,608,674 943,306 4,889,613 1,958,814
Income from
operations 5,057,089 3,199,804 8,864,626 5,701,655
Non-operating income
(expense):
Interest income 51,476 8,330 106,761 17,739
Interest expense (676,569) - (1,036,229) -
Other income 7,766 7,973 8,440 8,356
Other expense (64,197) - (71,997) -
Total non-
operating
income
(expense) (681,524) 16,303 (993,025) 26,095
Income before income
tax 4,375,565 3,216,107 7,871,601 5,727,750
Provision for income
tax 862,673 471,098 1,550,138 872,415
Net income 3,512,892 2,745,009 6,321,463 4,855,335
Other comprehensive
income
Foreign currency
translation gain 1,494,722 455,308 3,797,724 736,712
Comprehensive Income $ 5,007,614 $ 3,200,317 $ 10,119,187 $ 5,592,047
Weighted average
shares outstanding
Basic 29,200,304 24,210,183 29,200,304 24,210,183
Diluted 29,323,495 24,210,183 29,329,733 24,210,183
Earnings per share
Basic $ 0.12 $ 0.11 $ 0.22 $ 0.20
Diluted $ 0.12 $ 0.11 $ 0.22 $ 0.20
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