WUXI, China, March 31, 2014 /PRNewswire-FirstCall/ --
Cleantech Solutions International, Inc. ("Cleantech Solutions" or
"the Company") (NASDAQ: CLNT), a manufacturer of metal components
and assemblies used in various clean technology and manufacturing
industries and textile dyeing and finishing machines, today
announced its financial results for the three months and full year
ended December 31, 2013.
"We closed the year with solid financial performance. Full year
revenue exceeded expectations and net income nearly doubled,
despite the impact of a non-cash impairment charge related to
equipment held for operating lease at year end. The primary
driver of our success in 2013 was our dyeing machine segment, due
to the growing number of textile manufacturers who adopted our
low-emission airflow dyeing machines. Although we saw some
softness in sales to customers in the wind power industry, this was
offset by growth in sales of forged products from customers in
other industries, due to increased sales efforts and repeat
purchases from our diverse customer base," said Mr. Jianhua Wu, Chairman and CEO of Cleantech
Solutions. "We made a significant investment to expand our product
line to address new end and existing end markets and increase
capacity of our dyeing equipment segment to position us for future
success."
Fourth Quarter 2013 Results
Revenue for the fourth quarter of 2013 increased 29.4% to
$22.8 million, compared to
$17.6 million for the same period of
2012.
Revenue growth was primarily driven by sales of dyeing and
finishing equipment due to demand for the Company's low-emission
airflow dyeing machines, which meet the policies of local PRC
governments to phase out obsolete equipment and reduce pollution
from the dyeing process. In addition, the Company experienced
a decline in sales for forged rolled rings and related products for
customers in the wind power industry, which was offset by an
increase in sales of forged products from customers in other
industries.
The increase in revenue is summarized as follows:
- Revenue from the dyeing and finishing equipment segment
increased 34.2% to $12.5 million,
compared to $9.3 million for the
fourth quarter of 2012.
- Revenue from the sale of forged rolled rings to other
industries rose 120.1% to $6.0
million, compared with $2.7
million for the comparable period of the prior
year.
- Revenue from the sale of forged rolled rings for the wind power
industry declined 23.0% to $4.3
million, compared to $5.6
million for the comparable period last year.
Gross profit for the fourth quarter of 2013 increased 39.8% to
$5.9 million, compared to
$4.2 million for the same period in
2012. Gross margin increased to 26.0% during the fourth
quarter of 2013 compared to 24.1% for the same period a year ago.
The increase in gross margin for the fourth quarter was primarily
attributable to (i) increased operational and cost efficiencies for
forged rolled rings and related products segment, including the
allocation of fixed costs primarily consisting of depreciation, to
cost of revenues as the Company operated at higher production
levels and (ii) a slight decrease in raw materials costs in both
the forged rolled rings and related products and dyeing equipment
segments.
Operating expenses declined 10.7% to $3.1
million, compared to $3.5
million in the comparable period last year. The decline was
primarily due to a bad debt recovery and lower depreciation
expenses resulting from the classification of its electro-slag
re-melted ("ESR") equipment as held for lease in the fourth quarter
of 2013, on which depreciation was taken in the fourth quarter of
2012 but not in the fourth quarter of 2013. During the fourth
quarter of 2013, the Company recorded a $2.6
million non-cash impairment loss on the ESR equipment
compared to a non-cash impairment loss on the same equipment of
$2.2 million in the comparable period
last year.
Selling, general and administrative expenses for the three
months ended December 31, 2013 fell
49.4% to $0.5 million, primarily due
to a $0.7 million bad debt recovery,
which was partially offset by higher professional fees, payroll and
related benefits associated with expanding the business and an
increase in research and development expense related to the
Company's new dyeing equipment.
Operating income was $2.8 million,
up from $0.7 million in the same
period of 2012. Operating margin was 12.2% compared to 4.1% in the
fourth quarter last year.
Adjusted EBITDA, a non-GAAP measurement, which adds back to net
income interest expense, income tax, impairment loss, depreciation
and amortization was $7.3 million, up
from $4.8 million in the fourth
quarter last year. The calculation of adjusted EBITDA is
shown in a table following the financial statements.
Net income for the fourth quarter of 2013 was $2.1 million, or $0.60 per basic and diluted share, compared to
$0.5 million, or $0.17 per basic and diluted share, in the fourth
quarter of 2012. All share and per share information has been
adjusted to reflect a one-for-ten reverse stock split effective
March 6, 2012.
Full Year Results
For the year ended December 31,
2013, revenue increased 26.1% to $72.1
million from $57.2 million in the 2012. Gross profit
increased 34.5% to $17.7 million, compared to $13.1
million in 2012. Gross margin was 24.5%, compared to 23.0% in
2012. Operating income increased 79.6% to $11.4
million from $6.3 million in 2012. Adjusted
EBITDA, a non-GAAP measurement which adds interest expense, income
tax, impairment loss, warrant modification expense (which was
incurred in the first quarter of 2012), depreciation and
amortization back to net income, was $20.9 million, compared
to $15.3 million in 2012. Net income was $8.2
million, or $2.55 per basic and diluted share, up from
$4.2 million, or $1.65 per
basic and $1.58 per diluted share, in
2012. All share and per share information have been adjusted
to reflect a one-for-ten reverse stock split effective March
6, 2012.
Financial Condition
As of December 31, 2013, Cleantech
Solutions held cash and cash equivalents of $1.1 million compared with $1.4 million at December
31, 2012. Accounts receivable were $15.2 million and total current assets were
$24.0 million as of December 31, 2013. The Company had $3.1 million in short-term bank loans payable at
December 31, 2013, up from
$2.2 million at December 31, 2012. Stockholders'
equity was $91.5 million at
December 31, 2013.
In 2013, the Company generated $11.5
million in cash flow from operations. The increase in short
term loans, combined with $2.4
million in net proceeds from the sale of shares issued in
the second and third quarters of 2013 and cash flow from operations
was used to fund approximately $14.6
million in capital expenditures to expand production
capabilities and purchase equipment for the Company's dyeing and
finishing equipment segment.
Recent Events
In March 2014, the Company signed
an operating lease agreement related to the lease of ESR equipment,
which was used in 2010 and 2011 to produce forged products for the
high performance components market. The operating lease
commences on April 1, 2014 and has an
eight year term. Rental payments are recorded as revenue over
the lease term as earned and the equipment will be depreciated over
its estimated useful life of eight years starting April 1, 2014.
Business Outlook
"In 2014, we expect the Chinese government's more aggressive
stance to curb pollution will have a beneficial impact on our
dyeing machine segment. In anticipation of stricter
enforcement of environmental regulations, we expect strong order
flow from textile manufacturers for our low-emission airflow dyeing
machines, after treatment compacting machine and new, higher-end
dyeing and finishing machines. With additional capacity
coming online earlier this year, we expect our dyeing machine
segment to generate solid revenue growth and drive profitability in
2014."
"Given the challenges facing China's wind power market, we expect sales to
customers in this industry to play a less significant role in our
business going forward. We remain optimistic that our
products for the oil and gas industry will gain traction in 2014,
although we have not received any orders to date and we cannot
predict the size or timing of any sales or whether we will receive
orders. Overall, we hold a positive outlook for our business
in the year ahead. We plan to continue utilizing our
expertise in manufacturing precision products to meet demand in new
and existing end markets," Mr. Wu concluded.
Conference Call
Cleantech Solutions will conduct a conference call at
9:00 a.m. Eastern Time on
Monday, March 31, 2014 to discuss
financial results for the fourth quarter and fiscal year ended
December 31, 2013.
To participate in the live conference call, please dial the
following number five to ten minutes prior to the scheduled
conference call time: (877) 870-4263. International callers should
dial (412) 397-0790.
If you are unable to participate in the conference call at this
time, a replay will be available starting an hour after the
conference call through 10:00 A.M. ET
April 7, 2014. To access the replay,
dial (877) 344-7529. International callers dial (412) 317-0088, and
enter conference number: 10043417.
Use of Non-GAAP Financial Measures
The Company has included in this press release certain non-GAAP
financial measures. The Company believes that both management and
investors benefit from referring to these non-GAAP financial
measures in assessing the performance of the Company and when
planning and forecasting future periods. Readers are cautioned not
to view non-GAAP financial measures on a stand-alone basis or as a
substitute for GAAP measures, or as being comparable to results
reported or forecasted by other companies, and should refer to the
reconciliation of GAAP measures with non-GAAP measures also
included herein.
About Cleantech Solutions International
Cleantech Solutions is a manufacturer of metal components and
assemblies, primarily used in clean technology and other
industries. The Company supplies forging products, fabricated
products and machining services to a range of clean technology
customers and supplies dyeing and finishing equipment to the
textile industry. The Company's website is
www.cleantechsolutionsinternational.com. Any information on the
Company's website or any other website is not a part of this press
release.
Safe Harbor Statement
This release contains certain "forward-looking statements"
relating to the business of the Company and its subsidiary and
affiliated companies. These forward looking statements are often
identified by the use of forward-looking terminology such as
"believes," "expects" or similar expressions. Such forward looking
statements involve known and unknown risks and uncertainties that
may cause actual results to be materially different from those
described herein and in the conference call referred to in this
press release as anticipated, believed, estimated or expected.
Investors should not place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of a
variety of factors, including those discussed in the Company's
periodic reports that are filed with the Securities and Exchange
Commission and available on its website, including factors
described in "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our
Form 10-K for the year ended December
31, 2013. All forward-looking statements attributable
to the Company or to persons acting on its behalf are expressly
qualified in their entirety by these factors other than as required
under the securities laws. The Company does not assume a duty to
update these forward-looking statements.
Company Contacts:
Cleantech Solutions International, Inc.
Adam Wasserman, CFO
E-mail: adamw@cleantechsolutionsinternational.com
Web: www.cleantechsolutionsinternational.com
Compass Investor Relations
Elaine Ketchmere, CFA
Email: eketchmere@compass-ir.com
Web: www.compassinvestorrelations.com
- Financial Tables Follow-
CLEANTECH SOLUTIONS
INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
For the Quarters
Ended
|
For the Years
Ended
|
|
December
31,
|
December
31,
|
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
REVENUES
|
$
22,800,321
|
$
17,613,406
|
$
72,112,662
|
$
57,199,221
|
COST OF
REVENUES
|
16,873,793
|
13,373,200
|
54,446,324
|
44,062,636
|
GROSS
PROFIT
|
5,926,528
|
4,240,206
|
17,666,338
|
13,136,585
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Depreciation
|
111,551
|
413,283
|
573,090
|
1,535,715
|
Impairment loss
|
2,573,256
|
2,206,253
|
2,573,256
|
2,206,253
|
Selling, general and
administrative
|
451,916
|
893,858
|
3,126,992
|
3,050,911
|
Total
Operating Expenses
|
3,136,723
|
3,513,394
|
6,273,338
|
6,792,879
|
INCOME FROM
OPERATIONS
|
2,789,805
|
726,812
|
11,393,000
|
6,343,706
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
Interest income
|
6,278
|
465
|
22,287
|
11,384
|
Interest expense
|
(56,090)
|
(60,974)
|
(300,381)
|
(305,659)
|
Foreign currency gain
(loss)
|
43,486
|
(6,485)
|
27,686
|
157
|
Warrant modification
expense
|
-
|
-
|
-
|
(235,133)
|
Other (expense)
income
|
(235)
|
20,924
|
42,780
|
85,727
|
Total
Other Income (Expense), net
|
(6,561)
|
(46,070)
|
(207,628)
|
(443,524)
|
INCOME BEFORE INCOME
TAXES
|
2,783,244
|
680,742
|
11,185,372
|
5,900,182
|
INCOME
TAXES
|
673,556
|
211,429
|
2,999,795
|
1,701,602
|
NET INCOME
|
$
2,109,688
|
$
469,313
|
$
8,185,577
|
$
4,198,580
|
COMPREHENSIVE
INCOME:
|
|
|
|
|
NET INCOME
|
$
2,109,688
|
$
469,313
|
$
8,185,577
|
$
4,198,580
|
OTHER COMPREHENSIVE
INCOME:
|
|
|
|
|
Unrealized foreign currency translation gain
|
590,131
|
201,400
|
2,751,842
|
543,415
|
COMPREHENSIVE
INCOME
|
$
2,699,819
|
$
670,713
|
$
10,937,419
|
$
4,741,995
|
NET INCOME PER COMMON
SHARE:
|
|
|
|
|
Basic
|
$
0.60
|
$
0.17
|
$
2.55
|
$
1.65
|
Diluted
|
$
0.60
|
$
0.17
|
$
2.55
|
$
1.58
|
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING:
|
|
|
|
|
Basic
|
3,503,502
|
2,742,040
|
3,210,791
|
2,538,246
|
Diluted
|
3,503,502
|
2,742,040
|
3,210,791
|
2,649,043
|
CLEANTECH SOLUTIONS
INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE
SHEETS
|
|
December
31,
|
|
2013
|
2012
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash equivalents
|
$
1,114,873
|
$
1,445,728
|
Restricted cash
|
687,353
|
-
|
Notes receivable
|
703,718
|
88,029
|
Accounts receivable, net of allowance for doubtful
accounts
|
15,234,863
|
10,078,623
|
Inventories, net of reserve for obsolete inventory
|
4,733,558
|
5,897,555
|
Advances to suppliers
|
695,254
|
593,104
|
Prepaid VAT on purchases
|
489,302
|
542,032
|
Deferred tax assets - current portion
|
253,173
|
-
|
Prepaid expenses and other
|
74,030
|
428,326
|
Total
Current Assets
|
23,986,124
|
19,073,397
|
PROPERTY AND
EQUIPMENT - net
|
70,595,138
|
59,436,100
|
OTHER
ASSETS:
|
|
|
Deferred
tax assets - net of current portion
|
1,222,216
|
551,890
|
Equipment held for operating lease
|
4,751,206
|
7,118,555
|
Land use
rights, net
|
3,786,051
|
3,756,342
|
Total
Assets
|
$
104,340,735
|
$
89,936,284
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Short-term bank loans
|
$
3,109,453
|
$
2,216,558
|
Bank acceptance notes payable
|
687,353
|
-
|
Accounts payable
|
4,961,555
|
5,474,479
|
Accrued expenses
|
899,816
|
986,824
|
Capital lease obligation - current portion
|
-
|
251,413
|
Advances from customers
|
1,455,740
|
1,851,987
|
VAT and service taxes payable
|
126,349
|
206,527
|
Income taxes payable
|
1,623,603
|
822,082
|
Total
Current Liabilities
|
12,863,869
|
11,809,870
|
|
|
|
OTHER
LIABILITIES:
|
|
|
Capital lease obligation - net of current portion
|
-
|
132,756
|
Total Liabilities
|
12,863,869
|
11,942,626
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
Preferred stock ($0.001 par value; 10,000,000 shares
authorized;
0 shares issued and
outstanding at December 31, 2013 and 2012,
respectively)
|
-
|
-
|
Common stock ($0.001 par value; 50,000,000 shares
authorized;
3,503,502 and
2,894,586 shares issued and outstanding at
December 31, 2013 and 2012,
respectively)
|
3,503
|
2,894
|
Additional paid-in capital
|
31,532,308
|
28,987,128
|
Retained earnings
|
46,322,329
|
38,401,734
|
Statutory reserve
|
2,744,720
|
2,479,738
|
Accumulated other comprehensive gain - foreign currency
translation
adjustment
|
10,874,006
|
8,122,164
|
Total
Stockholders' Equity
|
91,476,866
|
77,993,658
|
Total
Liabilities and Stockholders' Equity
|
$
104,340,735
|
$
89,936,284
|
CLEANTECH SOLUTIONS
INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
For the Years
Ended
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
2013
|
2012
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
8,185,577
|
$
4,198,580
|
|
Adjustments to
reconcile net income from operations to net cash
|
|
|
|
|
|
provided by operating
activities:
|
|
|
|
|
|
Depreciation
|
|
6,704,386
|
6,519,394
|
|
|
Amortization of land
use rights
|
|
95,491
|
93,537
|
|
|
Increase (decrease)
in inventory reserve
|
|
41,381
|
(37,882)
|
|
|
Decrease in allowance
for doubtful accounts
|
|
(628,188)
|
(46,672)
|
|
|
Loss on impairment of
equipment held for operating lease
|
|
2,573,256
|
2,206,253
|
|
|
Loss on disposal of
fixed assets
|
|
|
11,391
|
-
|
|
|
Warrant modification
expense
|
|
-
|
235,133
|
|
|
Stock-based
compensation expense
|
|
423,112
|
167,714
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Notes
receivable
|
|
(604,798)
|
(34,178)
|
|
|
Accounts
receivable
|
|
(4,126,440)
|
(2,887,716)
|
|
|
Inventories
|
|
1,303,519
|
(1,549,740)
|
|
|
Prepaid value-added
taxes on purchases
|
|
70,059
|
981,236
|
|
|
Prepaid and other
current assets
|
|
91,666
|
(43,513)
|
|
|
Advances to
suppliers
|
|
(81,120)
|
(371,849)
|
|
|
Accounts
payable
|
|
(1,809,914)
|
438,945
|
|
|
Accrued
expenses
|
|
(112,797)
|
209,831
|
|
|
VAT and service taxes
payable
|
|
(86,004)
|
206,405
|
|
|
Income taxes
payable
|
|
(129,378)
|
(326,373)
|
|
|
Advances from
customers
|
|
(452,658)
|
675,667
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
11,468,541
|
10,634,772
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(14,633,745)
|
(10,744,247)
|
NET CASH USED IN
INVESTING ACTIVITIES
|
|
(14,633,745)
|
(10,744,247)
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Principal payments on
capital lease
|
|
(391,963)
|
(246,485)
|
|
|
Proceeds from bank
loans
|
|
5,653,824
|
3,481,101
|
|
|
Repayments of bank
loans
|
|
(4,846,135)
|
(3,639,333)
|
|
|
(Increase) decrease
in restricted cash
|
|
(678,459)
|
316,464
|
|
|
Increase (decrease)
in bank acceptance notes payable
|
|
678,459
|
(316,464)
|
|
|
Net proceeds from
sale of common stock
|
|
2,388,589
|
-
|
|
|
Proceeds from sale of
common stock - related parties
|
|
-
|
612,903
|
|
|
Proceeds from
exercise of warrants
|
|
-
|
198,142
|
NET CASH PROVIDED BY
FINANCING ACTIVITIES
|
|
2,804,315
|
406,328
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE ON CASH AND CASH EQUIVALENTS
|
|
30,034
|
(3,732)
|
|
|
|
|
|
|
|
NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
(330,855)
|
293,121
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS - beginning of year
|
|
1,445,728
|
1,152,607
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS - end of year
|
|
$
1,114,873
|
$
1,445,728
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
Interest
|
|
$
300,381
|
$
305,659
|
|
|
|
Income
taxes
|
|
$
3,129,174
|
$
2,027,976
|
|
|
|
|
|
|
|
NON-CASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
|
Property and
equipment acquired on credit as payable
|
|
$
1,121,719
|
$
-
|
|
Series A preferred
converted to common shares
|
|
$
-
|
$
13,198
|
|
Common stock issued
for future service
|
|
$
-
|
$
281,265
|
Reconciliation of Net
Income to EBITDA
|
(Amounts expressed in
US$)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net income
|
$
|
2,109,688
|
$
|
469,313
|
$
|
8,185,577
|
$
|
4,198,580
|
Add: income
tax
|
|
673,556
|
|
211,429
|
|
2,999,795
|
|
1,701,602
|
Add: interest
expense
|
|
56,090
|
|
60,974
|
|
300,381
|
|
305,659
|
Add: warrant
modification expense
|
-
|
|
-
|
|
-
|
|
235,133
|
Add: impairment
loss
|
|
2,573,256
|
|
2,206,253
|
|
2,573,256
|
|
2,206,253
|
Add: depreciation and
amortization
|
1,845,717
|
|
1,823,094
|
|
6,799,877
|
|
6,612,931
|
Adjusted
EBITDA
|
$
|
7,258,307
|
$
|
4,771,063
|
$
|
20,858,886
|
$
|
15,260,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non
GAAP Net Income and EPS
|
(Amounts expressed in
US$)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
2,109,688
|
|
$
469,313
|
|
$
8,185,577
|
|
$4,198,580
|
Add: impairment
loss
|
|
$
2,573,256
|
|
$
2,206,253
|
|
$
2,573,256
|
|
$
2,206,253
|
Add: warrant
modification expense
|
-
|
|
-
|
|
-
|
|
$235,133
|
Adjusted net
income
|
|
$
4,682,944
|
|
$
2,675,566
|
|
$
10,758,833
|
|
$
6,639,966
|
|
|
|
|
|
|
|
|
|
Weighted average
shares - diluted
|
|
3,503,502
|
|
2,742,040
|
|
3,210,791
|
|
2,649,043
|
|
|
|
|
|
|
|
|
|
Adjusted diluted
EPS
|
|
$1.34
|
|
$0.98
|
|
$3.35
|
|
$2.51
|
SOURCE Cleantech Solutions International, Inc.