- Closes the Quarter with 35 CNG Filling Stations - NEW YORK, Nov.
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 third quarter financial results for the period ended
September 30, 2008. Financial Highlights for the Third Quarter
2008: -- Revenue increased 102.7% year over year to $18.4 million
-- Gross profit increased 119.7% year over year to $9.5 million --
Income from operations increased 173.2% year over year to $6.4
million -- Net income of $5.1 million, or $0.18 per diluted share
-- Non-GAAP net income of $5.2 million, or $0.18 per diluted share
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, stated, "We
are pleased to share our third quarter results with our investors.
Despite the non-cash interest expenses incurred in the third
quarter, our net income increased 161.8% year over year and 46.2%
from the second quarter of 2008. The strong performance speaks to
the strength of our business as well as the favorable market
environment. In the third quarter, we continued to expand our CNG
filling station network. As of September 30, 2008, we had a total
of 35 stations, with 23 located in Shaanxi Province and 12 in Henan
Province. We have also added 1,107 residential, industrial and
commercial pipeline customers since the end of the second quarter
of 2008." Mr. Ji continued, "As planned, we invested approximately
$6.9 million in equipment and consulting fees related to our LNG
project in the third quarter. We also continued to upgrade our
management team with the appointment of Mr. Richard Wu, our new
CFO. We remain optimistic about the future and believe we have the
right management team in place to continue our expansion." Revenue
for the third quarter was $18.4 million, an increase of $9.3
million, or 102.7%, from $9.1 million in the third 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 92,984
from 83,979. Revenue from sales of natural gas increased 103.2% to
$15.4 million from $7.6 million in the prior year's period and
contributed approximately 83.4% of revenue performance in the third
quarter of 2008, consistent with 81.7% in the second quarter of
2008 and 83.2% in the third quarter of 2007. Revenue from
installation and other businesses increased 100.1% to $3.0 million,
or 16.6% of total revenue, from $1.5 million in the third quarter
of 2007. Gross profit increased 119.7% to $9.5 million in the third
quarter of 2008 from $4.3 million in the third quarter of 2007.
Gross margin was 51.6% in the third quarter of 2008, compared with
45.4% in the second quarter of 2008 and 47.6% in the prior year's
period. Gross margin performance reflects the higher margin revenue
generated from the natural gas sales in the Henan province. In July
2008, the Company renewed its supply contract in Henan to purchase
natural gas at a price of RMB 1.0 per cubic meter, compared with
RMB 1.55 per cubic meter previously. In the third quarter of 2008,
operating income increased 173.2% to $6.4 million from $2.4 million
in the third quarter of 2007. Operating expenses in the third
quarter of 2008 increased 56.0% to $3.1 million from $2.0 million
the year before. This increase reflected larger business operations
involving 35 CNG filling stations during the third quarter of 2008,
as well as ongoing selling-related expenses. Meanwhile, general and
administrative expense decreased by 5.8% year over year to $968,000
as a result of benefits of economy of scale over centralized
corporate functions and the Company's cost control efforts.
Operating margin was 34.9% in the third quarter of 2008, compared
with 29.9% in the second quarter of 2008 and 25.9% in the prior
year's period, reflecting higher gross margin offset by higher
operating expenses associated with a larger sales force. 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
third quarter of 2008, these non-cash non-operating expenses were
$119,938, or less than $0.01 per diluted share. Net income for the
third quarter of 2008 was $5.1 million, or $0.18 per diluted share.
Excluding the impact of the non-cash expenses explained above, net
income would have been $5.2 million or $0.18 per diluted share,
compared with $2.0 million, or $0.07 per diluted share, in the
third quarter of 2007. (Please refer to the non-GAAP reconciliation
table included in this press release.) Balance Sheet As of
September 30, 2008, the Company had $20.4 million in cash and cash
equivalents on hand, compared with $29.2 million as of June 30,
2008 and $41.3 million as of March 31, 2008. Guidance Please note
that 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.
Today the Company raised its full year 2008 revenue and net income
expectations. The Company now anticipates year over year revenue
growth in 2008 to be 92%, bringing total revenue for the year to
$68 million. This expectation is up from prior guidance of year
over year revenue growth of 70%, or approximately $60.2 million for
the year 2008. The Company now anticipates year over year net
income growth in 2008 to be 77%, bringing total net income for the
year to approximately $16 million. This expectation is up from
prior guidance of year over year net income growth of 70%, or
approximately $15.4 million for the year 2008. Conference Call
China Natural Gas management team will hold a conference call on
Thursday, November 13, 2008, at 8:00 am ET to discuss its third
quarter 2008 results. Listeners may access the call by dialing
1-888-206-4835 or 1-913-312-0710 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 November 20, 2008. Listeners may access the
replay by dialing 1-888-203-1112 or 1-719-457-0820 for
international callers, access code: 4859321. 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 $119,938 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 Company has provided a
reconciliation table of the non-GAAP measure to the equivalent GAAP
measure. 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. CHINA NATURAL GAS, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2008 AND 2007 (Unaudited) Three months ended Nine months ended
September 30 September 30 2008 2007 2008 2007 Revenue Natural gas
revenue $15,354,461 $7,555,131 $40,494,646 $19,243,968 Installation
and other 3,046,739 1,522,958 8,822,714 4,851,006 Total revenue
18,401,200 9,078,089 49,317,360 24,094,974 Cost of revenue Natural
gas cost 6,973,035 4,020,039 20,369,778 9,975,932 Installation and
other 1,935,798 738,211 5,700,976 2,138,734 Total cost of revenue
8,908,833 4,758,250 26,070,754 12,114,666 Gross profit 9,492,367
4,319,839 23,246,606 11,980,308 Operating expenses Selling
2,098,343 939,496 5,008,631 2,216,048 General and administrative
968,169 1,028,197 2,947,494 1,710,459 Total operating expenses
3,066,512 1,967,693 7,956,125 3,926,507 Income from operations
6,425,855 2,352,146 15,290,481 8,053,801 Non-operating income
(expense): Interest income 13,536 23,831 120,297 41,570 Interest
expense (212,774) - (1,249,003) - Other income (expense) (55,391)
31,148 (118,948) 39,504 Total non- operating income (expense)
(254,629) 54,979 (1,247,654) 81,074 Income before income tax
6,171,226 2,407,125 14,042,827 8,134,875 Provision for income tax
1,034,636 445,463 2,584,774 1,317,878 Net income 5,136,590
1,961,662 11,458,053 6,816,997 Other comprehensive income Foreign
currency translation gain 756,316 455,308 4,554,040 1,320,878
Comprehensive Income $5,892,906 $2,416,970 $16,012,093 $8,137,875
Weighted average shares outstanding Basic 29,200,304 27,122,196
29,200,304 25,191,521 Diluted 29,279,590 27,286,286 29,316,837
25,223,465 Earnings per share Basic $0.18 $0.07 $0.39 $0.27 Diluted
$0.18 $0.07 $0.39 $0.27 CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2008 and DECEMBER
31, 2007 September 30, 2008 December 31, 2007 (Unaudited) ASSETS
CURRENT ASSETS: Cash & cash equivalents $20,384,702 $13,291,729
Short-term investments - 238,554 Accounts receivable 1,622,508
306,179 Other receivable-employee advances 865,800 549,820
Inventories 445,420 231,339 Advances to suppliers 1,226,341 663,041
Prepaid expense and other current assets 891,255 109,722 Loan
receivable - 274,200 Total current assets 25,436,026 15,664,584
PROPERTY AND EQUIPMENT, net 55,153,057 32,291,995 CONSTRUCTION IN
PROGRESS 19,410,492 2,210,367 DEFERRED FINANCING COSTS 1,849,288 -
OTHER ASSETS 10,278,250 3,123,052 TOTAL ASSETS $112,127,113
$53,289,998 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable and accrued liabilities $715,890
$487,710 Other payables 98,090 55,979 Unearned revenue 384,745
327,220 Accrued interest 350,002 - Taxes payable 1,911,550
1,211,775 Total current liabilities 3,460,277 2,082,684 LONG-TERM
LIABILITIES: Notes payable, net of $16,104,432 discount 23,895,568
- Derivative liabilities - warrants 17,500,000 - Total long-term
liabilities 41,395,568 - 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 September 30, 2008 and December 31, 2007 2,920
2,920 Additional paid-in capital 32,098,740 32,046,879 Accumulative
other comprehensive gain 8,031,065 3,477,025 Statutory reserves
3,228,224 1,802,735 Retained earnings 23,910,319 13,877,755 Total
stockholders' equity 67,271,268 51,207,314 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $112,127,113 $53,289,998 CHINA NATURAL GAS,
INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES
FOR THE THREE MONTHS ENDED September 30, 2008 AND 2007 (Unaudited)
Three months ended September 30 2008 2007 GAAP Net income 5,136,590
1,961,662 Add: Amortization of discount on senior notes (after tax
effect) 79,508 - Amortization of deferred offering costs (after tax
effect) 20,316 - Adjusted Net Income (Excludes all non-cash items)
5,236,414 1,961,662 *Assume an effective tax rate of 16.77%
Weighted average shares outstanding Basic 29,200,304 27,122,196
Diluted 29,279,590 27,286,286 GAAP Basic EPS $0.18 0.07 Add:
Amortization of discount on senior notes 0.0027 - Amortization of
deferred offering costs 0.0007 - Adjusted Basic EPS $0.18 0.07 GAAP
Diluted EPS $0.18 0.07 Add: Amortization of discount on senior
notes 0.0027 - Amortization of deferred offering costs 0.0007 -
Adjusted Diluted EPS $0.18 0.07 DATASOURCE: China Natural Gas, Inc.
CONTACT: Ashley Ammon, ICR, Inc., (US) +1-203-682-8200, , or
Wei-Jung Yang, (China) +86-8523-3088, , both for China Natural Gas
Web site: http://www.naturalgaschina.com/
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