- 1Q09 Revenue Increases 32.1% YoY to $18.5 Million - NEW YORK, May
12 /PRNewswire-FirstCall/ -- 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 financial results for the first fiscal quarter ended
March 31, 2009 and a 1-for-2 reverse stock split effected April 28,
2009. First Quarter 2009 Results Revenue in the first quarter of
2009 increased 32.1% to $18.5 million from $14.0 million in the
first quarter of 2008. The increase in revenue was driven by a
31.9% increase in sales of natural gas to $15.0 million from $11.3
million, and a 54.1% increase in installation and other sales to
$2.4 million from $1.5 million. Gasoline revenue was $1.2 million,
an increase of 3.9% from $1.1 million in the prior year's period.
In the first quarter of 2009, gasoline contributed $1.2 million, or
6.3% of total revenue, compared to $1.1 million, or 8.1% of total
revenue, in the prior year's period. As the revenue contribution
from gasoline became material, the Company began to break out
revenue contribution from the sale of gasoline through its CNG
fueling stations in the fourth quarter of 2008. Gross profit in the
first quarter of 2009 increased 58.2% to $9.6 million, from $6.1
million in the first quarter of 2008. Gross margin expanded 859
basis points to 52.0% in the first quarter from 43.4% in the first
quarter of 2008. Gross margin performance reflects increased sales
of natural gas, which generated gross margin of approximately
54.9%, compared to 45.5% in the prior year's period. Operating
income in the first quarter of 2009 increased 47.8% to $5.6 million
from $3.8 million in the prior year's period. Operating margin in
the first quarter of 2009 was 30.4%, compared to 27.2% in the prior
year's period. Operating expenses in the first quarter of 2009 were
$4.0 million, compared to $2.3 million in the prior year's period,
reflecting expanded business operations. Net income in the first
quarter of 2009 increased 49.6% to $4.2 million, or $0.29 per
diluted share, from $2.8 million, or $0.19 per diluted share, in
the first quarter of 2008. Mr. Qinan Ji, Chairman and CEO of China
Natural Gas, commented, "We are pleased with strong financial
performance in the first three months of 2009. During this quarter,
we signed an agreement with the governments of Yulin city and
Shaanxi province that secured our power supply and provided a cost
savings of approximately RMB 26 million. We became the exclusive
provider of natural gas services to Xi'an Baqiao Science and
Technology Industrial Park, a transportation hub to eastern China.
We also grew our customer base for CNG to nearly 100,000 accounts.
We believe that all of these factors will contribute to our
sustained strong performance in the future." Liquidity and Capital
Resources As of March 31, 2009, the Company increased cash and cash
equivalents by $3.2 million to $9.1 million, compared to $5.9
million as of December 31, 2008. Cash flows from operations grew
78.1% YoY to $6.2 million, versus $3.5 million a year ago. The
Company invested an additional $2.5 million to construction in
progress related to its LNG project. Accounts receivable was a
modest $0.9 million, and DSOs remained significantly below 10 days.
Reverse Stock Split All share and per share amounts used in the
Company's discussion on financial results, consolidated financial
statements and notes thereto have been retroactively restated to
reflect the 1-for-2 reverse stock split, which was effected on
April 28, 2009. Although this reverse stock split has already
occurred under Delaware corporate law, the Company advises that the
Company's common stock continues to trade under the OTCBB ticker
symbol, "CHNG" on a pre 1-for-2 reverse stock split basis. The
Company is currently in the process of working with OTC Bulletin
Board through FINRA to ensure that the Company's common stock will
trade on a post 1-for-2 reverse stock split basis as soon as
possible. Financial Outlook for 2009 The Company anticipates full
year 2009 revenue will grow 15% to 20% to a range of $78 million to
$83 million, from $68 million in 2008. The Company estimates full
year 2009 net income will grow 15% to 22% to a range of $17.5
million to $18.5 million, from $15.2 million in 2008. Mr. Ji
concluded, "As demonstrated by our strong performance in revenue
growth, gross margin expansion, and solid cash flows, the first
quarter is a good start for China Natural Gas in 2009. We are very
pleased with the arrival of Ms. Veronica Chen to our senior
management team, as we welcome her multi-cultural experience,
profound knowledge of financial systems and markets, and impressive
professional and academic achievements. Ms. Chen will work closely
with me in helping China Natural Gas accomplish its strategic
objectives in 2009 and beyond. For the remainder of 2009, we remain
committed to listing on NASDAQ. We are focused on steadily growing
our CNG customer base, as we leverage our considerable operational
scale. I am confident in our management team and in our competitive
advantages, and I look forward to delivering sustained strong
financial results and to ultimately reward our supportive
shareholders with greater share value. Conference Call The
management team will hold a conference call on Tuesday, May 12,
2009, at 8:00 am ET to discuss its first quarter 2009 results.
Listeners may access the call by dialing 1-888-677-8769 or
1-913-312-1514 for international callers. A webcast will also be
available via the Company's website at
http://www.naturalgaschina.com/. A replay of the call will be
available through May 19, 2009. Listeners may access the replay by
dialing 1-888-203-1112 or 1-719-457-0820 for international callers,
access code: 6108490. 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 8.5 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 may contain forward-looking statements.
These statements are based on the current expectations or beliefs
of China Natural Gas, Inc. management 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 progress of construction and development
activities, fluctuation of natural gas prices, the availability of
natural gas supplies, changes in governmental regulations and/or
economic policies. CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (Unaudited)
Three Months Ended March 31, 2009 2008 Revenue Natural gas revenue
$ 14,965,819 $ 11,345,319 Gasoline revenue 1,174,398 1,130,750
Installation and other 2,387,449 1,549,605 Total revenue 18,527,666
14,025,674 Cost of revenue Natural gas cost 6,746,929 6,182,274
Gasoline cost 1,130,057 1,068,037 Installation and other 1,017,028
686,887 Total cost of revenue 8,894,014 7,937,198 Gross profit
9,633,652 6,088,476 Operating expenses Selling expenses 2,324,228
1,341,614 General and administrative expenses 1,681,921 939,325
Total operating expenses 4,006,149 2,280,939 Income from operations
5,627,503 3,807,537 Non-operating income (expense): Interest income
8,908 55,285 Interest expense (581,492) (359,660) Other income
(expense), net (2,303) 304 Change in fair value of warrant 197,051
- Foreign currency exchange loss (50,788) (7,430) Total
non-operating expense (428,624) (311,501) Income before income tax
5,198,879 3,496,036 Provision for income tax 997,256 687,465 Net
income 4,201,623 2,808,571 Other comprehensive income Foreign
currency translation gain (loss) (152,115) 2,303,002 Comprehensive
income $ 4,049,508 $ 5,111,573 Weighted average shares outstanding
Basic 14,600,152 14,600,152 Diluted 14,600,152 14,667,042 Earnings
per share Basic $ 0.29 $ 0.19 Diluted $ 0.29 $ 0.19 CHINA NATURAL
GAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH
31, 2009 AND DECEMBER 31, 2008 March 31, December 31, 2009 2008
(Unaudited) ASSETS ------ CURRENT ASSETS: Cash & cash
equivalents $ 9,058,361 $ 5,854,383 Accounts receivable 946,047
906,042 Other receivable - employee advances 180,205 332,263
Inventories 488,221 519,739 Advances to suppliers 684,632 837,592
Prepaid expense and other current assets 953,578 838,294 Loan
receivable 293,000 293,400 Total current assets 12,604,044
9,581,713 PROPERTY AND EQUIPMENT, NET 74,549,788 76,028,272
CONSTRUCTION IN PROGRESS 25,110,473 22,061,414 DEFERRED FINANCING
COSTS 1,644,372 1,746,830 OTHER ASSETS 9,278,092 8,844,062 TOTAL
ASSETS $123,186,769 $118,262,291 LIABILITIES AND STOCKHOLDERS'
EQUITY ------------------------------------ CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,103,837 $ 800,013
Other payables 336,936 124,151 Unearned revenue 1,138,536 944,402
Accrued interest 531,111 861,114 Taxes payable 1,904,943 1,862,585
Total current liabilities 5,015,363 4,592,265 LONG TERM
LIABILITIES: Notes payable, net of discount $14,844,315 and
$15,478,395 as of March 31, 2009 and December 31, 2008,
respectively 25,155,685 24,521,605 Redeemable liabilities -
warrants 17,500,000 17,500,000 Derivative liabilities - warrants
817,257 - Total long term liabilities 43,472,942 42,021,605
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,
14,600,152 shares issued and outstanding at March 31, 2009 and
December 31, 2008 1,460 1,460 Additional paid-in capital 25,271,339
32,115,043 Cumulative translation adjustment 8,508,945 8,661,060
Statutory reserves 4,284,815 3,730,083 Retained earnings 36,631,905
27,140,775 Total stockholders' equity 74,698,464 71,648,421 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $123,186,769 $118,262,291
CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Unaudited) Three Months Ended March 31, 2009 2008 CASH FLOWS FROM
OPERATING ACTIVITIES: Net income $4,201,623 $ 2,808,571 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 1,389,565 656,587 Loss on
disposal of building improvements and equipment - 11,957
Amortization of discount on senior notes 170,712 146,663
Amortization of financing costs 38,578 56,270 Stock based
compensation 14,842 - Change in fair value of warrants (197,051) -
Change in assets and liabilities: Accounts receivable (41,244)
(163,656) Other receivable - employee advances 151,617 -
Inventories 30,812 (782,687) Advances to suppliers 151,828 63,341
Prepaid expense and other current assets (100,912) (257,016)
Accounts payable and accrued liabilities 304,860 95,847 Other
payables 212,961 1,129 Unearned revenue 195,435 22,709 Accrued
interest (330,003) 73,717 Taxes payable 44,898 768,939 Net cash
provided by operating activities 6,238,521 3,502,371 CASH FLOWS
FROM INVESTING ACTIVITIES Purchase of property and equipment
(13,484) (555,720) Proceeds from short term investments - 243,200
Additions to construction in progress (2,552,098) (9,586,215)
Prepayment on long term assets (426,913) (4,128,711) Payment for
intangible assets (35,822) - Payment for land use rights - (25,091)
Net cash used in investing activities (3,028,317) (14,052,537) CASH
FLOWS FROM FINANCING ACTIVITIES: Proceeds from senior notes -
40,000,000 Payment for offering costs - (2,122,509) Net cash
provided by financing activities - 37,877,491 Effect of exchange
rate changes on cash and cash equivalents (6,226) 635,076 NET
INCREASE IN CASH & CASH EQUIVALENTS 3,203,978 27,962,401 CASH
& CASH EQUIVALENTS, BEGINNING OF PERIOD 5,854,383 13,291,729
CASH & CASH EQUIVALENTS, END OF PERIOD $9,058,361 $41,254,130
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid,
net of capitalized interest $1,084,130 $ - Income taxes paid $
997,257 $ 57,893 DATASOURCE: China Natural Gas, Inc. CONTACT:
Michael Tieu of ICR, Inc., +86-10-6599-7960, , for China Natural
Gas, Inc. Web Site: http://www.naturalgaschina.com/
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