NEW YORK, May 19 /PRNewswire-FirstCall/ -- China Natural Gas, Inc.
(OTC:CHNG) (BULLETIN BOARD: CHNG) , one of the leading providers of
pipeline natural gas for residential, commercial and industrial use
and compressed natural gas (CNG) for vehicular fuel in Xi'an,
China, today announced its first quarter financial results for the
period ended March 31, 2008. Financial Highlights for the First
Quarter 2008: -- Revenue increased 108.0% year over year to $14.0
million -- Gross profit increased 73.1% year over year to $6.1
million -- Income from operations increased 52.2% year over year to
$3.8 million -- Non-cash non-operating expense of $202,933 related
to the 5.0% Guaranteed Senior Notes issued in the first quarter of
2008 "We are very pleased to continue to demonstrate strong
earnings growth, which speaks to the underlying strength of our
business. During the first quarter of 2008, we added three new CNG
filling stations and 5,769 new residential, commercial and
industrial pipeline natural gas customers. As of March 31, 2008, we
had a total of 27 CNG filling stations and 90,269 residential,
commercial and industrial pipeline natural gas customers. As we
expand our business to additional Chinese regions other than
Shaanxi Province and Henan Province, we expect the increasing
demand for natural gas continues to drive robust financial
performance in the second quarter and the fiscal year of 2008,"
stated Mr. Qinan Ji, Chairman and CEO of China Natural Gas, Inc.
Mr. Ji continued, "Our LNG processing and distribution plant is
under smooth and intensive construction. In addition, in April
2008, we entered into an agreement with the Xi'an Internal Port
Administrative Committee to participate in the multi-year
development of Xi'an International Port District and Baliu
Ecological Park. We expect these projects to support our long term
growth and we will continue to update investors with the progress."
Revenue for the first quarter was $14.0 million, an increase of
108.0% compared to $6.7 million in the first quarter of 2007. The
increase in revenue was due primarily to contributions from
additional CNG filling stations which were not built or generating
revenue in the first quarter of 2007, as well as the increase in
residential, industrial and commercial pipeline customers to
approximately 90,269 from 75,000 in the first quarter of 2007.
Revenue from sales of natural gas increased 130.4% to $11.3 million
from $4.9 million in the prior year period, generating 81.0% of
total revenue in the first quarter of 2008. Installation and other
revenue increased 47.3% to $2.7 million from $1.8 million in the
first quarter of 2007, generating 19.0% of total revenue in the
first quarter of 2008. Gross profit increased 73.1% to $6.1 million
in the first quarter of 2008 from $3.5 million in the first quarter
of 2007. Gross margin was 43.4%, compared to 52.2% in the prior
year's period. Gross margin performance is primarily attributable
to the followings: (1) increase in revenue generated from
Company-owned CNG stations in the Henan Province, which generate a
lower gross margin than CNG stations in Xi'an, Shaanxi Province and
(2) installation and other revenue reflects an increase in revenue
generated from the Company's auto conversion business, which
generates a lower gross margin than installation or construction
revenue. In the first quarter of 2008, operating income increased
52.2% to $3.8 million from $2.5 million in the first quarter of
2007. Operating expenses in the first quarter of 2008 were $2.3
million, compared to $1.0 million in the first quarter of 2007. The
increase reflected larger business operations with 27 natural gas
filling stations operating during the first 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 process. Operating margin was
27.1%, compared to 26.9% in the fourth quarter of 2007 and 37.1% in
the first quarter of 2007, reflecting increased contribution from
natural gas sales and 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 expense related to the 5.0%
Guaranteed Senior Notes ("Notes") issued to Abax Lotus in January
and March 2008. As a result, non-operating expense increased to
$311,501 from non-operating income of $9,792 in the first quarter
of 2007. The increase is primarily due to $146,663 for the
amortization of discount on the Notes and $56,270 for the
amortization of deferred offering costs, as well as an interest
expense of $156,727. Net income was $2.8 million, or $0.10 per
diluted share, for the first quarter of 2008. Excluding the effect
of the non-cash amortization expense of $202,933, net income would
have been $3.0 million or $0.11 per diluted share, compared to $2.1
million, or $0.09 per diluted share, in the first quarter of 2007.
Balance Sheet As of March 31, 2008, the Company had $41.3 million
in cash and cash equivalents on hand, compared to $13.3 million as
of December 31, 2007. Fiscal Year 2008 Update 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 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
$202,933 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 MARCH 31, 2008 AND
2007 (Unaudited) Three months ended March 31 2008 2007 GAAP Net
income 2,808,571 2,110,326 Add: Amortization of discount on senior
notes (after tax effect) 117,770 - Amortization of deferred
offering costs (after tax effect) 45,185 - Adjusted Net Income
(Excludes all non-cash items) 2,971,526 2,110,326 *Assume an
effective tax rate of 19.7% Weighted average shares outstanding
Basic 29,200,304 24,210,183 Diluted 29,334,084 24,210,183 GAAP
Basic EPS $0.10 $0.09 Add: Amortization of discount on senior notes
0.004 - Amortization of deferred offering costs 0.002 - Adjusted
Basic EPS $0.11 0.09 GAAP Diluted EPS $0.10 $0.09 Add: Amortization
of discount on senior notes 0.004 - Amortization of deferred
offering costs 0.002 - Adjusted Diluted EPS $0.11 0.09 About China
Natural Gas, Inc. China Natural Gas, Inc., ("CHNG"), is the first
China-based natural gas company publicly traded in the US. It
currently owns and operates a 120 kilometer long compressed natural
gas pipeline in Xi'an, China, 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 has three profitable
business segments: retail natural gas at company-owned CNG filling
stations, end user delivery of natural gas services to residential,
commercial and industrial customers, and conversion of
gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered
vehicles. The city of Xi'an has approximately 20,000 Taxis, 3,000
buses and 2,000 special purpose vehicles that are powered by
compressed natural gas. This press release contains forward-looking
statements regarding revenue and net income growth, our LNG
processing and distribution plant and our agreement with the Xi'an
Internal Port Administrative Committee. 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 Bill Zima Integrated Corporate Relations
203-682-8200 CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS AS OF MARCH 31, 2008 AND DECEMBER 31, 2007 March 31,
2008 December 31, 2007 (Unaudited) ASSETS CURRENT ASSETS: Cash
& cash equivalents $ 41,254,130 $ 13,291,729 Short-term
investments - 238,554 Accounts receivable 486,111 306,179 Other
receivable 362,187 549,820 Inventories 1,040,612 231,339 Advances
625,893 663,041 Prepaid expense and other current assets 586,756
109,722 Loan receivable 285,600 274,200 Total current assets
44,641,289 15,664,584 PROPERTY AND EQUIPMENT, net 33,827,732
32,291,995 CONSTRUCTION IN PROGRESS 12,130,620 2,210,367 DEFERRED
OFFERING COSTS 2,054,204 - OTHER ASSETS 7,138,669 3,123,052 TOTAL
ASSETS $ 99,792,514 $ 53,289,998 LIABILITIES AND STOCKHOLDERS'
EQUITY CURRENT LIABILITIES: Accounts payable $ 404,121 $ 293,970
Other payables and accrued liabilities 175,715 249,719 Unearned
revenue 364,025 327,220 Accrued interest 236,111 - Taxes payable
2,047,763 1,211,775 Total current liabilities 3,227,735 2,082,684
LONG TERM LIABILITIES: Notes payable, net of $17,254,108 discount
22,745,892 - Derivative liabilities -- warrants 17,500,000 - Total
long term liabilities 40,245,892 - 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 March 31, 2008 and December 31, 2007 2,920 2,920
Additional paid-in capital 32,046,879 32,046,879 Cumulative
translation adjustment 5,780,027 3,477,025 Statutory reserves
2,168,501 1,802,735 Retained earnings 16,320,560 13,877,755 Total
stockholders' equity 56,318,887 51,207,314 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 99,792,514 $ 53,289,998 CHINA NATURAL GAS,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND
2007 (UNAUDITED) Three months ended March 31 2008 2007 Revenue
Natural gas revenue $ 11,345,319 $ 4,923,572 Installation and other
2,680,355 1,820,004 Total revenue 14,025,674 6,743,576 Cost of
revenue Natural gas cost 6,182,274 2,492,651 Installation and other
1,754,924 733,566 Total cost of revenue 7,937,198 3,226,217 Gross
profit 6,088,476 3,517,359 Operating expenses Selling expenses
1,341,614 594,129 General and administrative expenses 939,325
421,379 Total operating expenses 2,280,939 1,015,508 Income from
operations 3,807,537 2,501,851 Non-operating income (expense):
Interest income 55,285 9,409 Interest expense (156,727) -
Amortization of discount on senior notes (146,663) - Amortization
of deferred offering costs (56,270) - Other income 674 383 Other
expense (7,800) - Total non-operating income (expense) (311,501)
9,792 Income before income tax 3,496,036 2,511,643 Provision for
income tax 687,465 401,317 Net income 2,808,571 2,110,326 Other
comprehensive income Foreign currency translation gain 2,303,002
281,404 Comprehensive Income $ 5,111,573 $ 2,391,730 Weighted
average shares outstanding Basic 29,200,304 24,210,183 Diluted
29,334,084 24,210,183 Earnings per share Basic $ 0.10 $ 0.09
Diluted $ 0.10 $ 0.09 DATASOURCE: China Natural Gas, Inc. CONTACT:
In the U.S.: Ashley Ammon MacFarlane or Bill Zima, both of
Integrated Corporate Relations, +1-203-682-8200, for China Natural
Gas, Inc. Web site: http://www.naturalgaschina.com/
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