NEW YORK, March 10 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") , a leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, today announced its financial results for the fourth quarter and full fiscal year ended December 31, 2009.
Fourth Quarter 2009 Results
Revenue in the fourth quarter of 2009 increased 18% to $21.67 million from $18.40 million in the fourth quarter of 2008, driven by additional fueling stations and higher residential and commercial pipeline customers. Sales of natural gas grew 6% year-over-year to $16.10 million, from $15.25 million in the fourth quarter of 2008. Gasoline revenue in the fourth quarter of 2009 increased 69% to $1.94 million, from $1.15 million in the prior year's period. Installation and services revenue grew 81% year-over-year to $3.63 million, from $2.0 million a year ago. In the fourth quarter of 2009, sales of natural gas, gasoline, and installation and other services contributed 74%, 9%, and 17% of total revenue, respectively.
Gross profit in the fourth quarter of 2009 expanded 11% to $10.53 million, from $9.49 million in the prior year's same period, driven by the increased sales volume of natural gas and increased revenue from installation business. Gross margin in the fourth quarter of 2009 was 49%, compared to 52% a year ago, mainly due to a 30% increase of coal bed methane procurement cost in Henan province.
Operating income in the fourth quarter of 2009 was $6.77 million, an increase of 17% year-over-year, from $5.77 million in the prior year's period. Meanwhile, operating expenses in the fourth quarter of 2009 increased by approximately $38,518 to $3.76 million, versus $3.72 million in the prior year's period.
During the quarter, the Company recognized $442,432 non-cash gain from an estimated change in the fair value of warrants, versus zero in the fourth quarter of 2008.
Income tax expense was $1.13 million for an effective tax rate of 16%, as compared to an effective tax rate of 21% in the fourth quarter of 2008. Net income in the fourth quarter of 2009 increased 64% to $6.12 million, or $0.27 per diluted share, from $3.73 million, or $0.26 per diluted share, in the fourth quarter of 2008.
Excluding the impact of the non-cash expenses (see "About Non-GAAP Financial Measures" toward the end of this release), adjusted net income was $5.68 million, versus $4.26 million in the fourth quarter of 2008. For the fourth quarter of 2009, adjusted earnings per diluted share was $0.26, versus $0.30 per diluted share in the fourth quarter of 2008.
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, commented: "We are very pleased with our strong growth and profitability for the fourth quarter and full year 2009. During this quarter, we increased our number of pipeline customers to 108,423, and we expanded the number of our CNG gas stations to 36. We continued to see higher sales volumes from the increasing number of hybrid fleet and municipal vehicles in the city Xi'an, which utilize compressed natural gas as a cleaner, cheaper and more efficient fuel alternative. We believe our strong performance in 2009 demonstrates the long-term market potential for our CNG gas stations as well as our piped natural gas and installation services for residential, commercial and industrial customers."
Financial Highlights for the Fiscal Year 2009: -- Revenue increased 20% to $81.07 million, primarily due to the newly added fueling stations in 2008 contributing full year revenue in 2009 and the addition of 1 new fueling station during 2009, as well as the increase in installation and gasoline revenue; -- Gross profit up 23% to $40.16 million; -- Income from operations increased 19% to $25.05 million from 21.06 in fiscal year 2008. -- Non-GAAP net income of $20.21 million, or $1.20 per diluted share
Revenue for fiscal year 2009 increased 20% to $81.07 million from $67.72 million in fiscal year 2008, mainly due to the newly added fueling stations in 2008 contributing full year revenue in 2009 and the addition of 1 new fueling station during 2009, the increase in installation and gasoline revenue, and an increase in the number of residential and commercial pipeline customers to 108,423 as of December 31, 2009, from 96,033 as of December 31, 2008. Revenue from sales of natural gas increased 12% to $62.24 million from $55.75 million in the prior year. Installation and other revenue increased 69% to $12.45 million from $7.36 million in the fiscal year 2008. Gasoline revenue for the fiscal year was $6.38 million.
Gross profit for fiscal year 2009 increased 23% to $40.16 million from $32.74 million in 2008. Gross profit increase was mainly due to the increased sales volume of natural gas from fueling stations with low procurement price in coal bed methane from July 2008 to May 2009 in Henan; the increased sales volume of pipeline natural gas with stable unit price and cost; and the increased installation revenue from new pipeline customers. For fiscal year 2009, gross margin increased 120 basis points to 49.5% from 48.3% in 2008. The increase in gross margin was primarily due to lower coal bed methane procurement cost in Henan Province.
Operating expenses in the fiscal year 2009 increased 29% to $15.11 million from $11.68 million, reflecting costs associated with larger business operations, as well as continued expenses related to the acquisition of Lingbao Natural Gas, Co. in October 2008 as well as the newly added fueling stations since 2008. Operating income increased 19% to $25.05 million from $21.06 million. Operating margin decreased 20 basis points to 30.9% from 31.1% in the prior year, as a result of increased operating expenses.
Net income for fiscal year 2009 increased 24% to $18.83 million, or $1.13 per share, from $15.19 million, or $1.04 per share, in the fiscal year 2008. Excluding the impact of the non-cash expenses explained above, net income would have been $20.21 million, or $1.21 per diluted share, representing a year-over-year growth of 8%.
Balance Sheet
As of December 31, 2009, the Company had cash and cash equivalents of $48.18 million, compared with $55.93 million as of September 30, 2009, and $29.2 million as of June 30, 2009.
Mr. Ji concluded: "We remain very optimistic about the market growth and potential for natural gas usage in the developing Shaanxi and Henan provinces. We will continue to focus on growing our business strategically by steadily expanding our CNG customer base, especially focusing on sales to fleet vehicles and taxis. We are confident that our strong balance sheet, our current infrastructure, technical expertise and strategic CNG expansions will help sustain our steady growth and profitability.
"We also continue to remain optimistic about the long-term opportunities in the LNG market as China aims to increase natural gas usage. As recently announced, we expect the first phase our liquefied natural gas plant, the first LNG plant approved in Shaanxi, to be completed by June 30th. Upon the completion of our new LNG plant, we intend to aggressively grow our LNG business so as to capture a sizable share of China's emerging LNG market. We believe that once in full operations, our LNG business will enable us to further strengthen our market position, accelerate our growth and will bring greater value to our shareholders."
Conference Call
Management will hold a conference call on Thursday, March 11, 2010 at 8:00 a.m. EST (5:00 a.m. Pacific) to discuss these fourth quarter and year end results.
To participate in the call please dial (888) 549-7704, or (480) 629-9857 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found at the Company's website at http://www.naturalgaschina.com/ .
A replay of the call will be available for two weeks from 11:00 a.m. March 11, 2010, EST until 11:59 p.m. EDT on March 25, 2010. The number for the replay is (800) 406-7325, or (303) 590-3030 for international calls; the passcode for the replay is 4257535. In addition, a recording of the call will be available via the company's website at http://www.naturalgaschina.com/ for one year.
About China Natural Gas, Inc.
China Natural Gas transports and sells natural gas to vehicular fueling terminals, as well as commercial, industrial and residential customers through its distribution networks in China's Shaanxi and Henan Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 23 CNG fuelling stations in Shaanxi Province and 12 CNG fuelling stations in Henan Province. China Natural Gas' four primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fuelling stations for hybrid (natural gas/gasoline) powered vehicles; (2) the installation, distribution and sale of piped natural gas to residential, commercial and industrial customers through Company-owned pipelines; (3) the distribution and sale of gasoline through Company-owned CNG fuelling stations for hybrid (natural gas/gasoline) powered vehicles; and (4) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division.
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 related to the Senior Notes issued in January and March 2008 as well as change in fair market value of the Company's outstanding warrants. 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 Company has provided a reconciliation table 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 AND TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008 Three months ended Twelve months ended DECEMBER 31 DECEMBER 31 2009 2008 2009 2008 GAAP Net Income 6,118,889 3,732,315 18,830,787 15,190,368 Add: Amortization of discount on senior notes 449,676 280,250 1,004,677 Amortization of deferred offering costs 80,987 63,940 227,989 Change in fair value of warrants (442,432) 1,031,330 Non-GAAP Net Income 5,676,457 4,262,978 20,206,307 16,423,034 (Excludes all non-cash items) Weighted average shares outstanding Basic 21,183,904 14,600,154 16,624,294 14,600,154 Diluted 21,697,822 14,600,154 16,830,907 14,645,070 GAAP Basic EPS 0.29 0.26 1.13 1.04 Add: Amortization of discount on senior notes 0.0000 0.0308 0.0169 0.0688 Amortization of deferred offering costs 0.0000 0.0055 0.0038 0.0156 Change in fair value of warrants (0.0209) 0.0620 Non-GAAP Basic EPS 0.27 0.30 1.21 1.12 GAAP Diluted EPS 0.28 0.26 1.12 1.04 Add: Amortization of discount on senior notes 0.0000 0.0308 0.0167 0.0686 Amortization of deferred offering costs 0.0000 0.0055 0.0038 0.0156 Change in fair value of warrants (0.0204) 0.0613 Non-GAAP Diluted EPS 0.26 0.30 1.20 1.12 SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. For example, statements about the future plans and goals of the JV with CNPC and its prospects are forward looking and subject to risks. China Natural Gas, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statements on Forms S-1 and S-3, in each case as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.
CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 and 2008 2009 2008 ASSETS CURRENT ASSETS: Cash & cash equivalents $48,177,794 $5,854,383 Accounts receivable, net of allowance for doubtful accounts of $163,280 and $0 as of December 31, 2009 and 2008, respectively 1,289,116 906,042 Other receivable 709,741 60,784 Other receivable - employee advances 338,689 332,263 Inventories 841,837 519,739 Advances to suppliers 596,868 837,592 Prepaid expense and other current assets 1,076,915 777,510 Loan receivable 293,400 293,400 Total current assets 53,324,360 9,581,713 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 1,467,000 -- PROPERTY AND EQUIPMENT, NET 72,713,012 76,028,272 CONSTRUCTION IN PROGRESS 52,918,236 22,061,414 DEFERRED FINANCING COSTS 1,336,998 1,746,830 OTHER ASSETS 15,854,910 8,844,062 TOTAL ASSETS $197,614,516 $118,262,291 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $2,081,261 $800,013 Other payables 80,788 124,151 Unearned revenue 1,813,641 944,402 Accrued interest 786,052 861,114 Taxes payable 1,901,577 1,862,585 Total current liabilities 6,663,319 4,592,265 LONG TERM LIABILITIES: Notes payable, net of discount of $12,707,713 and $15,478,395 as of December 31, 2009 and 2008, respectively 27,292,287 24,521,605 Derivative liabilities - warrants 19,545,638 17,500,000 Total long-term liabilities 46,837,925 42,021,605 Total liabilities 53,501,244 46,613,870 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.0001 per share; 5,000,000 shares authorized; none issued -- -- Common stock, $0.0001 per share; 45,000,000 shares authorized, 21,183,904 shares and 14,600,154 shares issued and outstanding at December 31, 2009 and 2008 2,118 1,460 Additional paid-in capital 79,851,251 32,115,043 Cumulative translation adjustment 8,714,019 8,661,060 Statutory reserves 5,962,695 3,730,083 Retained earnings 49,583,189 27,140,775 Total stockholders' equity 144,113,272 71,648,421 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $197,614,516 $118,262,291 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 Years Ended December 31, 2009 2008 2007 Revenues Natural gas revenue $62,236,342 $55,746,893 28,278,033 Gasoline revenue 6,384,172 4,616,052 38,486 Installation and others 12,445,604 7,357,714 7,075,534 Total revenues 81,066,118 67,720,659 35,392,053 Cost of revenues Natural gas cost 29,478,854 27,234,508 14,838,997 Gasoline cost 5,993,207 4,277,458 34,747 Installation and others 5,432,978 3,469,671 3,151,331 Total cost of revenues 40,905,039 34,981,637 18,025,075 Gross profit 40,161,079 32,739,022 17,366,978 Operating expenses Selling expenses 9,566,387 7,651,948 3,451,161 General and administrative expenses 5,541,885 4,024,882 2,837,768 Total operating expenses 15,108,272 11,676,830 6,288,929 Income from operations 25,052,807 21,062,192 11,078,049 Non-operating income (expense): Interest income 125,287 209,502 70,697 Interest expense (747,172) (2,228,244) -- Other income (expense), net (186,805) 111,859 31,976 Change in fair value of warrants (1,031,330) -- -- Foreign currency exchange loss (69,077) (397,299) (150,729) Total non-operating expense (1,909,097) (2,304,182) (48,056) Income before income tax 23,143,710 18,758,010 11,029,993 Provision for income tax 4,312,923 3,567,642 1,913,923 Net income 18,830,787 15,190,368 9,116,070 Other comprehensive income Foreign currency translation gain 52,959 5,184,035 2,637,573 Comprehensive income $18,883,746 $20,374,403 11,753,643 Weighted average shares outstanding Basic 16,624,294 14,600,154 13,100,340 Diluted 16,830,907 14,645,070 13,150,901 Earnings per share Basic $1.13 $1.04 0.70 Diluted $1.12 $1.04 0.69 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 Years Ended December 31, 2009 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $18,830,787 $15,190,368 $ 9,116,070 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,571,772 3,474,905 1,639,685 Loss on disposal of equipment 21,373 24,806 -- Amortization of discount on senior notes 280,250 1,004,677 -- Amortization of financing costs 63,940 227,989 -- Options issued for services 66,535 66,704 -- Stock based compensation 158,517 -- -- Change in fair value of warrants 1,031,330 -- -- Change in assets and liabilities: Accounts receivable (387,948) (568,370) 290,660 Other receivable (644,083) 247,349 36,929 Other receivable - employee advances (6,425) (55,747) -- Inventories (322,099) (267,470) 71,226 Advances to suppliers 240,724 (125,896) 245,514 Prepaid expense and other current assets (306,445) (642,857) (11,113) Accounts payable and accrued liabilities 45,888 275,929 28,531 Other payables (43,362) 63,239 (208,669) Unearned revenue 869,239 583,940 22,425 Accrued interest (75,062) 861,114 -- Taxes payable 38,991 556,121 (754,817) Net cash provided by operating activities 25,433,922 20,916,801 10,476,441 CASH FLOWS FROM INVESTING ACTIVITIES Payment on investment in unconsolidated joint ventures (1,467,000) -- -- Purchase of property and equipment (1,074,066) (43,225,673)(14,180,053) Proceeds from sales of equipment 41,325 194,891 -- Proceeds from (purchases of) short term investments -- 250,821 (229,106) Additions to construction in progress (28,020,498) (19,012,750) (519,309) Prepayment on long term assets (6,139,766) (5,729,833) (1,914,343) Return of acquisition deposit (283,200) -- -- Payment for intangible assets (161,486) (53,826) -- Payment for land use rights (432,566) (30,354) (42,529) Net cash used in investing activities (37,537,257) (67,606,724)(16,885,340) CASH FLOWS FROM FINANCING ACTIVITIES: Stock issued for cash 57,607,813 -- 15,000,000 Proceeds from senior notes -- 40,000,000 -- Payment for offering costs (3,237,454) (2,122,509) (1,176,533) Net cash provided by financing activities 54,370,359 37,877,491 13,823,467 Effect of exchange rate changes on cash and cash equivalents 56,387 1,375,086 582,948 NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS 42,323,411 (7,437,346) 7,997,516 CASH & CASH EQUIVALENTS, BEGINNING OF YEAR 5,854,383 13,291,729 5,294,213 CASH & CASH EQUIVALENTS, END OF YEAR $48,177,794 $5,854,383 $13,291,729 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net of capitalized interest $503,845 $902,777 $-- Income taxes paid $4,178,066 $2,998,627 $2,387,487 Non-cash transactions for investing and financing activities: Purchase of equipment through accounts payable $1,234,603 $-- $-- Construction in progress transferred to property and equipment $-- $823,464 $-- Prepayment on long-term assets transferred to property and equipment $-- $405,630 $-- For more information, please contact: China Natural Gas Inc. Jacky Shi IR Director Tel: +86-29-8832-3325 x922 Cell: +86-139-9287-9998 Email: yjshi@naturalgaschina.com Investor Relations: RedChip Companies, Inc. Jon Cunningham Tel: +1-800-733-2447 x107 Email: info@redchip.com Web: http://www.redchip.com/
China Natural Gas, Inc.
CONTACT: China Natural Gas Inc., Jacky Shi, IR Director, +86-29-8832-3325
x922 or +86-139-9287-9998, or yjshi@naturalgaschina.com; Investor Relations:
RedChip Companies, Inc., Jon Cunningham, +1-800-733-2447 x107, or
info@redchip.com
Web site: http://www.naturalgaschina.com/
http://www.redchip.com/
