NEW YORK, March 16 /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 fourth quarter and full year financial
results for the fiscal year ended December 31, 2008. Financial
Highlights for the Fourth Quarter of 2008: -- Revenues increased
62.9% to $18.4 million; -- Gross profit grew 76.2% to $9.5 million;
-- Income from operations increased 90.8% to $5.8 million; and --
Non-GAAP net income of $4.2 million, or $0.14 per diluted share.
"We are delighted to announce our strong results for the fourth
quarter and full year 2008. We achieved revenue of $67.7 million
and non-GAAP net income of $16.2 million for the full year 2008.
Both were in-line with our expectations. Natural gas sales, which
grew 97% year over year, continued to drive our strong results,"
stated Mr. Qinan Ji, Chairman and CEO of China Natural Gas. Mr. Ji
continued, "During 2008, we made significant progress expanding our
business and ended the year with 35 CNG filling stations as well as
96,033 residential, commercial and industrial pipeline customers.
We also successfully secured several exclusive contracts to further
expand our pipeline business, including the agreement with the town
of Tangyu and the recently announced exclusive contract with Xi'an
Baqiao Science and Technology Industrial Park. We believe these
contracts will benefit our performance going into 2009 and beyond."
"Even though our business model continues to prove resilient in
this current economic downturn, we remain prudent in expanding our
businesses in this challenging environment and with each dollar of
our shareholders' money. While focusing on growing natural gas
business, we will take a more cautious approach in opening new
stations and anticipate fewer station acquisitions this year. We
will also continue to execute on our existing projects. Our LNG
project, expected to complete in the latter half of 2009, will fuel
our growth in 2010 and beyond. Our LNG plant facility will enable
us to further diversify our product portfolio and once it becomes
fully operational in January 2010, we believe we can distribute up
to half a million cubic meters of natural gas per day in the
initial phase. In the mean time, we are working diligently with
NASDAQ to obtain listing as soon as we can," Mr. Ji stated. Revenue
in the fourth quarter of 2008 increased 62.9% to $18.4 million from
$11.3 million in the fourth quarter of 2007. The increase in
revenue was driven by the contribution from 11 additional CNG
fueling stations and the addition of more than 11,000 residential,
industrial and commercial pipeline customers in 2008, bringing the
number of stations to 35 and customers to 96,033. Revenue from
sales of natural gas increased 68.8% to $15.3 million from $9.0
million in the fourth quarter of 2007. Installation revenue was
$2.0 million, remained flat compared with $2.2 million in the prior
year's period. In the fourth quarter of 2008, the Company began to
break out revenue contribution from the sale of gasoline through
its CNG fueling stations, as the revenue contribution from gasoline
became material. The Company started selling gasoline in late 2007
to better serve the diverse needs of its customers. In the fourth
quarter of 2008, gasoline revenue was $1.1 million, or 6.1% of
total revenue. While the company expects revenue from gasoline to
grow steadily, management believes that the sale of natural gas
through its own CNG stations presents the best opportunity for
future growth and therefore will maintain its focus on the
expansion of the natural gas business. Gross profit in the fourth
quarter of 2008 increased 76.2% to $9.5 million from $5.4 million
in the fourth quarter of 2007. Gross margin increased 390 basis
points to 51.6% in the fourth quarter, compared with 47.7% in 4Q07.
Gross margin performance reflects higher margin generated from the
natural gas revenue, partially offset by lower margin generated
from gasoline sales. When the Company renewed its supply contract
in Henan in July of 2008, the purchase cost per cubic meter of
natural gas decreased to RMB 1.0 from RMB 1.55 previously. As a
result, natural gas generated gross margin of approximately 55.0%,
compared with 46.2% in the prior year's period. Operating income in
the fourth quarter of 2008 increased 90.8% to $5.8 million from
$3.0 million in the prior year's period. Operating margin in the
fourth quarter of 2008 was 31.4%, an increase of 4.6% from 26.8% in
the prior year's period. Operating expenses in the fourth quarter
of 2008 were $3.7 million, compared with $2.4 million in the prior
year period, reflecting significantly larger business operations,
partially offset by a 4.4% year over year decrease in general and
administrative expense. 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 of 2008. In the
fourth quarter of 2008, these non-cash non-operating expenses were
$420,048 (after tax) or 0.01 per diluted share. Net income in the
fourth quarter of 2008 increased 62.3% to $3.7 million, or $0.13
per diluted share, from $2.3 million, or $0.08 per diluted share,
in the fourth quarter of 2007. Excluding the impact of the non-cash
expenses explained above, net income would have been $4.2 million,
or $0.14 per diluted share, representing a growth rate of 80.6%.
Financial Highlights for the Fiscal Year 2008: -- Revenue increased
91.3% to $67.7 million, driven by 11 additional CNG filling
stations in 2008 and continued growth of pipeline customers; --
Gross profit up 88.5% to $32.7 million; -- Income from operations
increased 90.1% to $21.1 million; -- Non-GAAP net income of 16.2
million, or $0.55 per diluted share Revenue for fiscal year 2008
increased 91.3% to $67.7 million from $35.4 million in fiscal year
2007. The increase in revenue was due primarily to contribution
from 11 additional CNG filling stations and the increase in
residential, industrial and commercial pipeline customers to
approximately 96,033 from 84,500 in 2007. Revenue from sales of
natural gas increased 97.1% to $55.7 million from $28.3 million in
the prior year. Installation revenue increased 4.0% to $7.4 million
from $7.1 million in the fiscal year 2007. Gasoline revenue for the
fiscal year was $4.6 million. Gross profit for fiscal year 2008
increased 88.5% to $32.7 million from $17.4 million in 2007. The
increase in gross profit primarily reflected the addition of 11
fueling stations. For fiscal year 2008, gross margin decreased 73
basis points to 48.3% from 49.1% in 2007. The decrease is primarily
attributable to the increase in gasoline sales, which generated
gross margin of 7.3%, compared with 51.1% generated by natural gas
sales and 52.8% by installation revenue. Operating expenses in the
fiscal year 2008 increased 85.7% to $11.7 million from $6.3
million, reflecting costs associated with larger business
operations, as well as continued expenses related to the
identification of future natural gas fueling station locations and
costs associated with the government licensing and approval
process. Operating income increased 90.1% to $21.1 million from
$11.1 million. Operating margin decreased 20 basis points to 31.1%
from 31.3% in the prior year, as a result of increased operating
expense. Net income for fiscal year 2008 increased 66.6% to $15.2
million, or $0.52 per share, from $9.1 million, or $0.35 per share,
in the fiscal year 2007. Excluding the impact of the non-cash
expenses explained above, net income would have been $16.2 million,
or $0.55 per diluted share, representing a year over year growth of
77.6%. Balance Sheet As of December 31, 2008, the Company had cash
and cash equivalents of $5.9 million, compared with $20.4 million
as of September 30, 2008, and $29.2 million as of June 30, 2008.
Conference Call The Company will hold a conference call on Monday,
March 16, 2009, at 8:00 am ET to discuss its fourth quarter and
full year 2008 results. Listeners may access the call by dialing
1-888-205-6743 or 1-913-312-0411 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 March 23, 2009. Listeners may access the replay
by dialing 1-888-203-1112 or 1-719- 457-0820 for international
callers, access code: 7468764. CHINA NATURAL GAS, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES FOR THE
THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007 Three months ended
December 31 2008 2007 GAAP Net Income 3,732,315 2,299,073 Add:
Amortization of discount on senior notes (after tax) 355,942 -
Amortization of deferred offering costs (after tax) 64,105 -
Non-GAAP Net Income 4,152,363 2,299,073 *Assume an effective tax
rate of 20.8% for 2008 Weighted average shares outstanding Basic
29,200,304 26,200,679 Diluted 29,200,304 26,301,802 GAAP Basic EPS
0.13 0.08 Add: Amortization of discount on senior notes (after tax)
0.0122 - Amortization of deferred offering costs (after tax) 0.0022
- Non-GAAP Basic EPS 0.14 0.08 GAAP Diluted EPS 0.13 0.08 Add:
Amortization of discount on senior notes (after tax) 0.0122 -
Amortization of deferred offering costs (after tax) 0.0022 -
Non-GAAP Diluted EPS 0.14 0.08 CHINA NATURAL GAS, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES FOR THE
YEAR ENDED DECEMBER 31, 2008 AND 2007 Year Ended December 31 2008
2007 GAAP Net Income 15,190,368 9,116,070 Add: Amortization of
discount on senior notes (after tax) 813,594 - Amortization of
deferred offering costs (after tax) 184,627 - Non-GAAP Net Income
16,188,590 9,116,070 *Assume an effective tax rate of 19.0% for
2008 Weighted average shares outstanding Basic 29,200,304
26,200,679 Diluted 29,290,139 26,301,802 GAAP Basic EPS 0.52 0.35
Add: Amortization of discount on senior notes (after tax) 0.0279 -
Amortization of deferred offering costs (after tax) 0.0063 -
Non-GAAP Basic EPS 0.55 0.35 GAAP Diluted EPS 0.52 0.35 Add:
Amortization of discount on senior notes (after tax) 0.0278 -
Amortization of deferred offering costs (after tax) 0.0063 -
Non-GAAP Diluted EPS 0.55 0.35 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. 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
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. CONTACT ICR, Inc. Ashley Ammon (US) +1
203-682-8200 Wei-Jung Yang (China) +86 6599-7968 CHINA NATURAL GAS,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME Year Ended Three Months Ended December 31,
December 31, 2008 2007 2008 2007 (Unaudited) Revenue Natural gas
revenue $55,746,893 $28,278,033 $15,252,247 $9,034,065 Gasoline
revenue 4,616,052 38,486 1,130,591 38,486 Installation and other
7,357,714 7,075,534 2,020,461 2,224,528 Total revenue 67,720,659
35,392,053 18,403,299 11,297,079 Cost of revenue Natural gas cost
27,234,508 14,838,997 6,864,730 4,863,065 Gasoline cost 4,277,458
34,747 1,051,669 34,747 Installation and other 3,469,671 3,151,331
994,485 1,012,597 Total cost of revenue 34,981,637 18,025,075
8,910,883 5,910,409 Gross profit 32,739,022 17,366,978 9,492,416
5,386,670 Operating expenses Selling expenses 7,651,948 3,451,161
2,643,317 1,235,113 General and administrative expenses 4,024,882
2,837,768 1,077,388 1,127,309 Total operating expenses 11,676,830
6,288,929 3,720,705 2,362,422 Income from operations 21,062,192
11,078,049 5,771,711 3,024,248 Non-operating income (expense):
Interest income 209,502 70,697 89,205 29,127 Interest expense
(2,228,244) - (979,241) - Other income (expense), net 111,859
31,976 102,101 (7,528) Foreign currency exchange loss (397,299)
(150,729) (268,593) (150,729) Total non-operating income (expense)
(2,304,182) (48,056) (1,056,528) (129,130) Income before income tax
18,758,010 11,029,993 4,715,183 2,895,118 Provision for income tax
3,567,642 1,913,923 982,868 596,045 Net income 15,190,368 9,116,070
3,732,315 2,299,073 Other comprehensive income Foreign currency
translation gain 5,184,035 2,637,573 629,995 1,316,695
Comprehensive Income $20,374,403 $11,753,643 $4,362,310 $3,615,768
Weighted average shares outstanding Basic 29,200,304 26,200,679
29,200,304 26,200,679 Diluted 29,290,139 26,301,802 $29,200,304
$26,301,802 Earnings per share Basic $0.52 $0.35 $0.13 $0.08
Diluted $0.52 $0.35 $0.13 $0.08 CHINA NATURAL GAS, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008
and 2007 2008 2007 ASSETS CURRENT ASSETS: Cash & cash
equivalents $5,854,383 $13,291,729 Short-term investments - 238,554
Accounts receivable 906,042 306,179 Other receivable 60,784 292,320
Other receivable - employee advances 332,263 257,500 Inventories
519,739 231,339 Advances to suppliers 837,592 663,041 Prepaid
expense and other current assets 777,510 109,722 Loan receivable
293,400 274,200 Total current assets 9,581,713 15,664,584 PROPERTY
AND EQUIPMENT, net 76,028,272 32,291,995 CONSTRUCTION IN PROGRESS
22,061,414 2,210,367 DEFERRED FINANCING COSTS 1,746,830 - OTHER
ASSETS 8,844,062 3,123,052 TOTAL ASSETS $118,262,291 $53,289,998
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable and accrued liabilities $800,013 $487,710 Other payables
124,151 55,979 Unearned revenue 944,402 327,220 Accrued interest
861,114 - Taxes payable 1,862,585 1,211,775 Total current
liabilities 4,592,265 2,082,684 LONG TERM LIABILITIES: Notes
payable, net of $15,478,395 discount 24,521,605 - Derivative
liabilities - warrants 17,500,000 - Total long term liabilities
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, 29,200,304 shares issued and
outstanding at December 31, 2008 and 2007 2,920 2,920 Additional
paid-in capital 32,113,583 32,046,879 Cumulative translation
adjustment 8,661,060 3,477,025 Statutory reserves 3,730,083
1,802,735 Retained earnings 27,140,775 13,877,755 Total
stockholders' equity 71,648,421 51,207,314 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $118,262,291 $53,289,998 DATASOURCE: China
Natural Gas, Inc. CONTACT: Ashley Ammon, (US) +1 203-682-8200, , or
Wei-Jung Yang, (China) +86 6599-7968, , both of ICR, Inc. Web site:
http://www.naturalgaschina.com/
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