- 3Q09 Revenue Increases 9.4% YoY to $20.1 Million - NEW YORK, Nov.
10 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural
Gas" or the "Company") (NASDAQ:CHNG), 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 third
fiscal quarter, ended September 30, 2009. Third Quarter 2009
Results Revenue in the third quarter of 2009 increased 9.4% to
$20.1 million from $18.4 million in the third quarter of 2008,
driven by additional fueling stations and higher residential and
commercial pipeline customers. Sales of natural gas grew 0.7% YoY
to $15.5 million, from $15.4 million in the third quarter of 2008.
Gasoline revenue in the third quarter of 2009 increased 37.5% to
$1.6 million, from $1.2 million in the prior year's period.
Installation and services revenue grew 63.4% YoY to $3.0 million,
from $1.9 million a year ago. In the third quarter of 2009, sales
of natural gas, gasoline, and installation and other services
contributed 76.8%, 8.1%, and 15.1% of total revenue, respectively.
Gross profit in the third quarter of 2009 expanded 2.4% to $9.7
million, from $9.5 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 third quarter of
2009 was 48.3%, compared to 51.6% a year ago, mainly due to higher
procurement costs of natural gas in Henan. Operating income in the
third quarter of 2009 was $5.9 million, a decrease of 8.4% YoY,
from $6.4 million in the prior year's period. Meanwhile, operating
expenses in the third quarter of 2009 increased by approximately
$0.7 million to $3.8 million, versus $3.1 million in the prior
year's period, mainly due to additional expenses related to the
acquisition of Lingbao Natural Gas, Co. and the addition of 3 new
fueling stations added since the third quarter of 2009.
Consequently, third quarter 2009 operating margin was 29.3%,
compared to 34.9% for the same period of last year. During the
quarter, the Company recognized $0.4 million non-cash expense from
an estimated change in the fair value of warrants, versus zero in
the third quarter of 2008. Income tax expense was $1.0 million for
an effective tax rate of 17.7%, as compared to an effective tax
rate of 16.8% in the third quarter of 2008. Net income in the third
quarter of 2009 decreased 9.5% to $4.6 million, or $0.29 per
diluted share, from $5.1 million, or $0.35 per diluted share, in
the third 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 5.1 million, versus $5.3
million in the third quarter of 2008. For the third quarter of
2009, adjusted earnings per diluted share was $0.32, versus $0.36
per diluted share in the third quarter of 2008. Mr. Qinan Ji,
Chairman and CEO of China Natural Gas, commented, "We are satisfied
with our third quarter's steady growth and profitability. During
this quarter, we increased our number of pipeline customers to
118,973, and we expanded the number of our CNG gas stations to 36.
We also successfully completed a secondary offering and were
encouraged by the strong interest and solid participation by new
and existing shareholders. We believe this transaction will ensure
the future growth of our LNG business and expansion of our existing
CNG business, as well as further strengthen our balance sheet and
enhance our working capital." Liquidity and Capital Resources As of
September 30, 2009, the Company increased cash and cash equivalents
to $55.9 million, compared to $9.7 million as of June 30, 2009.
During the quarter, cash flow provided by operating activities was
$3.9 million, versus $4.6 million a year ago. The Company invested
an additional $7.9 million to construction-in-progress related to
its LNG project. Accounts receivable was a modest $1.1 million, and
Days Sales Outstanding remained solidly below 10 days. Financial
Outlook for 2009 The Company reaffirms its projection for the full
year 2009 of revenue growing 15% to 20% to a range of $78 million
to $83 million, from $68 million in 2008. The Company also
reaffirms its net income guidance of a range of $17.5 million to
$18.5 million, a 15% to 22% growth from $15.2 million in 2008. Mr.
Ji concluded, "We are excited about the potential demand growth and
price increase in China's natural gas market. We will continue to
grow our business strategically by steadily expanding our CNG
customer base, and we are confident that our integrated strengths
of considerable operational scale, technical expertise, and balance
sheet will help sustain our steady growth and profits. "We remain
optimistic about our long-term opportunities in the LNG market. As
recent as mid October of 2009, our LNG plant was on schedule to be
completed and to begin operations by the end of this year. However,
recent unexpected events have pushed that date back to 2Q10. During
mid-October, we learned that several imported critical components
took longer to ship and subsequently were held up at entry ports
due to a change in tariff policy, which required additional
documentation. In late October, we were also notified that the LNG
plant requires additional reinforcements in order to meet our
strict safety requirements. Eventually, 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 nascent LNG market. We
believe that once in full operations, our LNG business will enable
us to further strengthen our market position, enhance our brand,
accelerate our growth and ultimately reward our new and existing
shareholders with greater value." Conference Call The management
team will hold a conference call on Tuesday, November 10th, 2009,
at 8:00 am ET to discuss its third quarter 2009 results. Listeners
may access the call by dialing 1-888-230-5944 or 1-913-312-1482 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 17, 2009. Listeners may
access the replay by dialing 1-888-203-1112 or 1-719-457-0820 for
international callers, access code: 6706463. 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 NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008 Three months ended Nine months ended
SEPTEMBER 30 SEPTEMBER 30 2009 2008 2009 2008 GAAP Net Income
4,647,519 5,136,590 12,711,898 11,458,053 Add: Amortization of
discount on senior notes 63,054 95,528 280,250 555,001 Amortization
of deferred offering costs 11,505 24,410 63,940 147,002 Change in
fair value of warrants 357,979 -- 1,473,762 -- Non-GAAP Net Income
5,080,057 5,256,528 14,529,850 12,160,056 (Excludes all non-cash
items) Weighted average shares outstanding Basic 15,754,696
14,600,154 14,985,001 14,600,154 Diluted 16,139,820 14,639,795
15,035,172 14,658,419 GAAP Basic EPS 0.29 0.35 0.85 0.78 Add:
Amortization of discount on senior notes 0.0040 0.0065 0.0187
0.0380 Amortization of deferred offering costs 0.0007 0.0017 0.0043
0.0101 Change in fair value of warrants 0.0227 -- 0.0983 --
Non-GAAP Basic EPS 0.32 0.36 0.97 0.83 GAAP Diluted EPS 0.29 0.35
0.85 0.78 Add: Amortization of discount on senior notes 0.0039
0.0065 0.0186 0.0379 Amortization of deferred offering costs 0.0007
0.0017 0.0043 0.0100 Change in fair value of warrants 0.0222 --
0.0980 -- Non-GAAP Diluted EPS 0.32 0.36 0.97 0.83 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 third 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. 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: ICR, Inc. Michael Tieu Tel:
+86-10-6599-7960 Email: CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND DECEMBER
31, 2008 September 30, December 31, 2009 2008 (Unaudited) ASSETS
CURRENT ASSETS: Cash & cash equivalents $ 55,931,579 $
5,854,383 Accounts receivable 1,141,615 906,042 Other receivable -
employee advances 238,962 332,263 Inventories 1,464,958 519,739
Advances to suppliers 1,809,560 837,592 Prepaid expense and other
current assets 455,586 838,294 Loan receivable 293,400 293,400
Total current assets 61,335,660 9,581,713 PROPERTY AND EQUIPMENT,
NET 71,840,861 76,028,272 CONSTRUCTION IN PROGRESS 42,124,222
22,061,414 DEFERRED FINANCING COSTS 1,439,456 1,746,830 OTHER
ASSETS 13,350,012 8,844,062 TOTAL ASSETS $ 190,090,211 $
118,262,291 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable and accrued liabilities $ 1,412,215 $
800,013 Other payables 245,397 124,151 Unearned revenue 1,741,827
944,402 Accrued interest 274,941 861,114 Taxes payable 1,942,670
1,862,585 Total current liabilities 5,617,050 4,592,265 LONG TERM
LIABILITIES: Notes payable, net of discount of $13,457,880 and
$15,478,395 as of September 30, 2009 and December 31, 2008,
respectively 26,542,120 24,521,605 Redeemable liabilities -
warrants 17,500,000 17,500,000 Derivative liabilities - warrants
2,488,070 -- Total long term liabilities 46,530,190 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, 21,183,904 and 14,600,154 shares issued and outstanding
at September 30, 2009 and December 31, 2008, respectively 2,118
1,460 Additional paid-in capital 79,812,871 32,115,043 Cumulative
translation adjustment 8,700,988 8,661,060 Statutory reserves
5,417,413 3,730,083 Retained earnings 44,009,581 27,140,775 Total
stockholders' equity 137,942,971 71,648,421 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 190,090,211 $ 118,262,291 CHINA NATURAL GAS,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2009 AND 2008 (Unaudited) Three months ended Nine months ended
September 30 September 30 2009 2008 2009 2008 Revenue Natural gas
revenue $ 15,454,386 $ 15,354,461 $ 46,140,884 $ 40,494,646
Gasoline revenue 1,633,478 1,187,754 4,440,892 3,466,601
Installation and other 3,037,320 1,858,985 8,813,594 5,356,113
Total revenue 20,125,184 18,401,200 59,395,370 49,317,360 Cost of
revenue Natural gas cost 7,536,188 6,973,035 21,773,635 20,369,778
Gasoline cost 1,534,806 1,085,311 4,194,615 3,208,326 Installation
and other 1,336,498 850,487 3,797,586 2,492,650 Total cost of
revenue 10,407,492 8,908,833 29,765,836 26,070,754 Gross profit
9,717,692 9,492,367 29,629,534 23,246,606 Operating expenses
Selling expenses 2,406,462 2,098,343 7,062,429 5,008,631 General
and administrative expenses 1,422,300 968,169 4,286,620 2,947,494
Total operating expenses 3,828,762 3,066,512 11,349,049 7,956,125
Income from operations 5,888,930 6,425,855 18,280,485 15,290,481
Non-operating income expense) Interest income 7,248 13,536 23,940
120,297 Interest expense (68,407) (212,774) (745,064) (1,249,003)
Other income (expense), net 178,728 (6,786) (137,954) (17,512)
Change in fair value of warrants (357,979) -- (1,473,762) --
Foreign currency exchange income (loss) 280 (48,605) (50,527)
(101,436) Total non- operating expense (240,130) (254,629)
(2,383,367) (1,247,654) Income before income tax 5,648,800
6,171,226 15,897,118 14,042,827 Provision for income tax 1,001,281
1,034,636 3,185,220 2,584,774 Net income 4,647,519 5,136,590
12,711,898 11,458,053 Other comprehensive income Foreign currency
translation gain 195,040 756,316 39,928 4,554,040 Comprehensive
income $ 4,842,559 $ 5,892,906 $ 12,751,826 $ 16,012,093 Weighted
average shares outstanding Basic 15,754,696 14,600,154 14,985,001
14,600,154 Diluted 16,139,820 14,639,795 15,035,172 14,658,419
Earnings per share Basic $ 0.29 $ 0.35 $ 0.85 $ 0.78 Diluted $ 0.29
$ 0.35 $ 0.85 $ 0.78 CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008 (Unaudited) Nine Months Ended September
30, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $
12,711,898 $ 11,458,053 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 4,175,175 2,295,534 Loss on disposal of equipment
21,372 12,265 Amortization of discount on senior notes 280,250
555,001 Amortization of financing costs 63,940 147,002 Stock based
compensation 186,672 51,861 Change in fair value of warrants
1,473,762 -- Change in assets and liabilities: Accounts receivable
(235,396) (1,269,832) Other receivable (31,011) -- Other receivable
- employee advances 93,231 (273,759) Inventories (754,309)
(194,580) Advances to suppliers (971,240) (508,417) Prepaid expense
and other current assets 223,206 (783,706) Accounts payable and
accrued liabilities 611,924 193,212 Other payables 121,234 37,587
Unearned revenue 796,827 34,855 Accrued interest (586,173) 350,002
Taxes payable 80,025 606,233 Net cash provided by operating
activities 18,261,387 12,711,311 CASH FLOWS FROM INVESTING
ACTIVITIES: Purchase of property and equipment (47,797)
(21,693,376) Proceeds from sales of equipment 41,308 -- Proceeds
from short term investments -- 249,464 Additions to construction in
progress (18,064,065) (16,679,747) Prepayment on long term assets
(4,434,118) (6,774,616) Proceeds from loan receivable -- 286,740
Return of acquisition deposit 449,970 -- Payment for intangible
assets (68,347) -- Payment for land use rights (455,830) -- Net
cash used in investing activities (22,578,879) (44,611,535) CASH
FLOWS FROM FINANCING ACTIVITIES: Stock issued for cash 57,607,813
-- Proceeds from senior notes -- 40,000,000 Payment for offering
costs (3,237,452) (2,122,509) Net cash provided by financing
activities 54,370,361 37,877,491 Effect of exchange rate changes on
cash and cash equivalents 24,327 1,115,706 NET INCREASE IN CASH AND
CASH EQUIVALENTS 50,077,196 7,092,973 CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,854,383 13,291,729 CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 55,931,579 $ 20,384,702 SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION: Interest paid, net of capitalized interest $
1,014,956 $ -- Income taxes paid $ 3,176,730 $ 1,203,048
DATASOURCE: China Natural Gas, Inc. CONTACT: China Natural Gas
Inc., Jacky Shi, IR Director, +86-29-8832-3325 x922, or
+86-139-9287-9998, or ; ICR, Inc., Michael Tieu, +86-10-6599-7960,
or Web site: http://www.naturalgaschina.com/
Copyright