CHINA NEW ENERGY GROUP CO. 
By
Full Year 2009 Highlights
-- Revenue increased 114.4% to $11.8 million compared to 2008
-- Gross profit increased 139.8% to $8.6 million
-- Gross margin increased 780 basis points to 73.5%
-- Operating income increased 214.1% to $4.9 million
-- Operating margin increased to 42.0% from 28.7%
-- Net income from continuing operations was $6.8 million, or $0.04 per
diluted share, compared to a net loss from continuing operations of
$1.6 million, or ($0.09) per diluted share, last year
-- Adjusted net income from continuing operations, which excludes the
non-cash impact of the change in fair value of derivative financial
instruments, was $3.2 million, or $0.02 per diluted share, up 247.1%
from adjusted net income of $0.9 million, or $0.01 per share, last
year(*)
"We achieved strong growth in revenues, gross and operating margins, and
earnings in 2009," said Mr. Yangkan Chong, Chief Executive Officer. "This
performance was driven by both organic growth and growth via strategic
acquisitions. We increased the number of households connected to our natural
gas network, grew the number of industrial customers we service, and expanded
into new and attractive markets. We expect to continue to benefit from the
strong demand for natural gas in
Full Year 2009 Results
For the twelve months ended
Cost of sales was
Operating expenses were
The Company's full year 2009 and 2008 financial statements include a
non-cash impact from the change in fair value of derivative financial
instruments of
Net income from continuing operations was
In
In fiscal 2009 and 2008, the Company recorded non-cash deemed preferred
stock dividends of
(*) See table following this press release for a reconciliation of income
from continuing operations and diluted EPS to exclude the non-cash
impact from the change in fair value of derivative financial
instruments and for a reconciliation of net income attributable to
common shareholders to exclude the non-cash impact from the change in
fair value of derivative financial instruments and non-cash deemed
preferred dividends.
Financial Condition
As of
Recent Developments
In
In
In
In
In
In
Business Outlook
China New Energy primarily operates in the northeastern cities of
The Company's growth strategy is to focus on under-penetrated, growing small- and medium-sized cities and enter into favorable franchise agreements with local governments for long-term exclusive rights to develop the local natural gas distribution network and supply natural gas in their area. China New Energy looks at the following criteria when identifying attractive areas for geographic expansion: size and density of population, concentration of industrial/commercial activities, environmental policies of the regional government, potential for further development, exclusivity of distribution, and required methods of delivery. The Company is also focused on diversifying its revenue stream towards a greater focus on industrial customers and natural gas sales. The Company's recently completed and announced acquisitions are in line with these selection criteria.
Mr. Chong concluded, "We are optimistic about our business and believe
that with the acquisitions we made in 2009 and those that we have announced in
2010, China New Energy is well positioned to capitalize on the continued
rising demand for natural gas consumption in
Conference Call
The Company will host a conference call at
If you are unable to participate in the call at this time, a replay will
be available for 14 days starting on
Use of Non-GAAP Financial Information
GAAP results for years ended
About China New Energy Group Company
China New Energy Group Company ("China New Energy" or the "Company") is a
vertically integrated natural gas company engaged in the development of
natural gas distribution networks, and the distribution of natural gas to
residential, industrial, and commercial users in small and medium sized cities
in
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to access natural gas for distribution, and ability to identify and develop operational locations under favorable terms, changes in natural gas pricing mechanism imposed by the Chinese government, changes in the regulatory environment and future national or regional economic and competitive conditions, and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For further information, please contact:
Eric Yu, Chief Financial Officer
Email: ericyu@cnegc.com
Web: http://www.cnegc.com
Investor Relations Contact:
CCG Investor Relations
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: athan.dounis@ccgir.com
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
-FINANCIAL TABLES FOLLOW-
CHINA NEW ENERGY GROUP COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,672,884 $ 5,612,356
Restricted cash 180,352 221,152
Accounts receivable, net of allowance
for doubtful accounts of $- and $- 6,137,403 1,501,431
Receivable from sale of subsidiary 5,119,055 --
Inventories, net 419,259 231,336
Prepaid expenses 280,337 128,748
Deemed receivable from former
shareholders of subsidiaries acquired
for settlement of certain liabilities 1,983,782 --
Net current assets of discontinued
operations -- 717,532
Total current assets 16,793,072 8,412,555
Property, plant and equipment, net 17,212,324 9,744,916
Other receivables 2,482,072 2,253,588
Deposits for acquisitions 197,696 --
Intangible assets, net 1,344,008 1,124,605
Deposits paid for acquisition of long
term assets 1,972,162 1,424,747
Goodwill 224,488 --
Net non-current assets of discontinued
operations -- 3,972,336
TOTAL ASSETS $ 40,225,822 $ 26,932,747
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 882,773 $ 105,573
Accruals and other payables 191,737 346,598
Acquisition consideration payable 1,651,888 1,838,946
Tax payable 1,600,683 228,933
Registration rights penalties payable 2,160,000 900,000
Related party payables 97,893 498,703
Dividends payable on preferred stock 509,381 194,000
Derivative financial instruments -
warrants 6,768,106 5,506,143
Liabilities to be settled by former
shareholders of subsidiaries acquired 1,983,782 --
Net liabilities of discontinued
operations -- 1,128,863
TOTAL CURRENT LIABILITIES 15,846,243 10,747,759
Commitments and contingencies
Preferred Stock: 10,000,000 shares
authorized, $0.001 par value Series A
Convertible Preferred Stock:
2,098,918 and 1,857,373 shares issued
and outstanding, liquidation preference
of $10,137,774 and $8,971,112,
respectively 7,031,818 7,031,818
Series B Convertible Preferred Stock:
1,116,388 and 0 shares issued and
outstanding, liquidation preference
of $5,399,969 and $0 2,153,307 --
CHINA NEW ENERGY GROUP COMPANY'S
STOCKHOLDERS' EQUITY
Common Stock: 500,000,000 shares
authorized, $0.001 par value,
101,788,199 and 100,000,041 shares
issued and outstanding, respectively 101,788 100,000
Additional paid in capital 10,152,971 9,396,046
Retained earnings (Accumulated deficit) 1,423,523 (3,809,149)
Statutory surplus reserve fund 1,746,890 1,746,890
Accumulated other comprehensive income 1,600,941 1,616,977
TOTAL CHINA NEW ENERGY GROUP COMPANY'S
STOCKHOLDERS' EQUITY 15,026,113 9,050,764
Non-controlling interest 168,341 102,406
TOTAL STOCKHOLDERS' EQUITY 15,194,454 9,153,170
TOTAL LIABILITIES, REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY $ 40,225,822 $ 26,932,747
CHINA NEW ENERGY GROUP COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the year ended
December 31,
2009 2008
Revenues:
Connection services $ 11,093,444 $ 4,919,392
Natural gas 680,451 571,835
11,773,895 5,491,227
Cost of Revenues:
Connection services 2,468,537 1,386,320
Natural gas 655,686 498,377
3,124,223 1,884,697
Gross Profit 8,649,672 3,606,530
Operating Expenses:
General and administrative expenses 2,196,225 1,068,810
Selling expenses 245,692 62,668
Registration rights penalties 1,260,000 900,000
Total operating expenses 3,701,917 2,031,478
Operating Income 4,947,755 1,575,052
Other Income (Expenses):
Change in fair value of derivative
financial instruments - warrants 3,608,077 (2,553,870)
Gain on acquisition of Wuyuan 313,056 --
Interest income 69,560 11,777
Interest expense (10,719) (33,718)
Other income 13,022 4,972
Total other income (expenses) 3,992,996 (2,570,839)
Income (Loss) From Continuing
Operations, Before Income Tax 8,940,751 (995,787)
Income Tax 2,142,816 639,088
Income (Loss) From Continuing
Operations, net of Income Tax 6,797,935 (1,634,875)
Discontinued Operations:
Income from discontinued operations,
net of Income Tax 515,748 1,387,100
Gain (loss) on disposal of subsidiary 911,065 (1,098,253)
Income (loss) from Discontinued 1,426,813 288,847
Operations, net of Income Tax
Net Income (Loss) 8,224,748 (1,346,028)
Net Income Attributable to
Non-controlling Interest (65,935) (24,010)
Net Income (Loss) Attributable to China
New Energy Group 8,158,813 (1,370,038)
Dividends and Deemed Dividend on
Preferred Stock (2,926,141) (7,225,818)
Net Income (Loss) Attributable to
Common Stockholders $ 5,232,672 $ (8,595,856)
Other Comprehensive Income:
Net Income (Loss) 8,224,748 (1,346,028)
Foreign currency translation adjustment 16,036 924,621
Comprehensive income $ 8,240,784 $ (421,407)
Income (Loss) per share - Basic
Income (loss) from continuing
operations $ 0.05 $ (0.09)
Income (loss) from discontinued
operations 0.01 (0.00)
Total income (loss) per share $ 0.06 $ (0.09)
Income per share - Diluted
Income (loss) from continuing $ $
operations 0.04 (0.09)
Income (loss) from discontinued
operations 0.01 0.00
Total income (loss) per share $ 0.05 $ (0.09)
Weighted average Common Stock
outstanding
Basic 100,268,687 98,727,193
Diluted 209,282,696 124,375,102
CHINA NEW ENERGY GROUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended
December 31,
2009 2008
Cash flows from operating activities:
Net income (loss) $ 8,224,748 $ (1,346,028)
Net income from discontinued operations 1,426,813 288,847
Net income (loss) from continuing operations 6,797,935 (1,634,875)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Change in fair value of derivative
financial instruments - warrants (3,608,077) 2,553,870
Gain on acquisition of Wuyuan (313,056) --
Registration rights penalties 1,260,000 900,000
Depreciation and amortization 358,226 387,443
Changes in operating assets and liabilities:
Accounts receivable (4,633,674) (287,336)
Other receivables (136,184) 561,356
Inventories (104,892) 76,903
Prepaid expenses (151,550) (1,521,871)
Accounts payable 776,795 (669,613)
Accruals and other payables (411,305) (1,481,756)
Tax payable 1,371,043 (647,387)
Cash provided by (used in) operating
activities - continuing operations 1,205,261 (1,763,266)
Cash provided by (used in) operating
activities - discontinued operations (360,372) 420,982
Net cash provided by (used in) operating
activities 844,889 (1,342,284)
Cash flows from investing activities
Proceeds from discontinued operations 730,900 --
Deposit paid and acquisition of
property, plant and equipment (5,136,626) (1,846,691)
Net cash received from exchange
of subsidiary -- 66,841
Deposits for acquisitions (197,696) --
Payment made to acquire subsidiary -
Chensheng (1,838,946) --
Payment made to acquire subsidiary -
Wuyuan (237,621) --
Payment made to acquire subsidiary -
Zhanhua Jiutai (1,398,766) --
Cash used in investing
activities-continuing operations (8,078,755) (1,779,850)
Cash used in investing
activities-discontinued operations (511,375) (915,403)
Net cash used in investing activities (8,590,130) (2,695,253)
Cash flows from financing activities
Net proceeds from issuance of
preferred stock 4,729,472 7,076,302
Contribution from former non-
controlling interest 441,827 --
(Repayment to) related parties (400,529) --
Proceeds from related parties -- 335,132
Change in restricted cash 40,800 (221,152)
Cash provided by financing
activities-continuing operations 4,811,570 7,190,282
Cash provided by financing
activities-discontinued operations -- --
Net cash provided by financing activities 4,811,570 7,190,282
Effect of exchange rate changes on
cash and cash equivalents (5,801) 148,583
Net (decrease) increase in cash and
cash equivalents (2,939,472) 3,301,328
Cash and cash equivalents - beginning
of year 5,612,356 2,311,028
Cash and cash equivalents - end of year $2,672,884 $5,612,356
Supplemental disclosures of cash flow
information:
Cash paid for interest -- --
Cash paid for income tax $1,302,664 $1,885,638
Supplemental disclosure of non-cash
investing and financing activities:
Preferred stock dividends payable $772,334 $194,000
Preferred stock dividends paid in
common stock 456,953 --
Registration rights penalties 1,260,000 900,000
Acquisition consideration payable
related to the acquisition of Chensheng -- 1,838,946
Acquisition consideration payable
related to the acquisition of Wuyuan 636,850 --
Acquisition consideration payable
related to the acquisition of Zhanhua Jiutai 1,015,038 --
Receivable for disposal of
discontinued operations $5,119,055 $--
CHINA NEW ENERGY GROUP COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
Shares Amount Capital Deficit)
BALANCE, December 31, 2007 94,908,650 $94,909 $5,277,108 $4,786,707
Recapitalization 7,091,391 7,091 (7,091) --
Cancellation of stock in
recapitalization (2,000,000) (2,000) 2,000 --
Warrants issued in
connection with
private placement -- -- (984,091) --
Cost of raising capital -- -- (1,923,698) --
Deemed dividend on
issuance of
preferred stock -- -- 7,031,818 (7,031,818)
Preferred stock dividend -- -- -- (194,000)
Disposal of non-
controlling interest -- -- -- --
Net income (loss) -- -- -- (1,370,038)
Currency translation
adjustment -- -- -- --
BALANCE,
December 31, 2008 100,000,041 $100,000 $9,396,046 $(3,809,149)
Warrants issued in
connection with
private placement -- -- (1,623,346) --
Cost of raising capital -- -- (670,528) --
To record deemed
dividend due to
beneficial conversion
feature of preferred
shares -- -- 2,153,807 (2,153,807)
Contribution from non-
controlling interest -- -- 441,827 --
Preferred stock dividend -- -- -- (772,334)
Dividend paid by Common
Stock 1,788,158 1,788 455,165 --
Net income -- -- -- 8,158,813
Currency translation
adjustment -- -- -- --
BALANCE,
December 31, 2009 101,788,199 $101,788 $10,152,971 $1,423,523
CHINA NEW ENERGY GROUP COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Statutory Other Non- Total
Surplus Compre- cont- Stock
Reserve hensive rolling -holders'
Fund Income Interest Equity
BALANCE, December 31, 2007 $1,746,890 $692,356 $97,875 $12,695,845
Recapitalization -- -- -- --
Cancellation of stock in
recapitalization -- -- -- --
Warrants issued in
connection with
private placement -- -- -- (984,091)
Cost of raising capital -- -- -- (1,923,698)
Deemed dividend on issuance
of preferred stock -- -- -- --
Preferred stock dividend -- -- -- (194,000)
Disposal of non-controlling
interest -- -- (19,479) (19,479)
Net income (loss) -- -- 24,010 (1,346,028)
Currency translation
adjustment -- 924,621 -- 924,621
BALANCE, December 31, 2008 $1,746,890 $1,616,977 $102,406 $9,153,170
Warrants issued in
connection with private
placement -- -- -- (1,623,346)
Cost of raising capital -- -- -- (670,528)
To record deemed dividend
due to beneficial
conversion feature of
preferred shares -- -- -- --
Contribution from non-
controlling interest -- -- -- 441,827
Preferred stock dividend -- -- -- (772,334)
Dividend paid by
Common Stock -- -- -- 456,953
Net income -- -- 65,935 8,224,748
Currency translation
adjustment -- (16,036) -- (16,036)
BALANCE, December 31, 2009 $1,746,890 $1,600,941 $168,341 $15,194,454
CHINA NEW ENERGY GROUP COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Twelve Months Ended December 31,
2009
Adjusted Net Income (Loss) and
Diluted EPS From Continuing Operations 2009 2008
GAAP Net Income (Loss) from
Continuing Operations $6,797,935 ($1,634,875)
Change in fair value of derivative
financial instruments - warrants ($3,608,077) $2,553,870
Adjusted Amount Net Income from
Continuing Operations $3,189,858 $918,995
Weighted average number of shares -
Diluted 209,282,696 124,375,102
Adjusted Diluted EPS from Continuing
Operations $0.02 $0.01
Twelve Months Ended December 31,
2009
Adjusted Net Income (Loss) and
Diluted EPS Attributable to Common
Shareholders 2009 2008
GAAP Net Income (Loss) and
Attributable to Common Shareholders $5,232,672 ($8,595,856)
Non-cash Deemed Preferred Dividend $2,153,807 $7,031,818
Change in fair value of derivative
financial instruments - warrants ($3,608,077) $2,553,870
Adjusted Amount $3,778,402 $989,832
Weighted average number of shares -
Diluted 209,282,696 124,375,102
Adjusted Diluted EPS Attributable to
Common Shareholders $0.02 $0.01
SOURCE China New Energy Group Company
