WUXI, China, April 17, 2016
/PRNewswire/ -- Cleantech Solutions International, Inc. ("Cleantech
Solutions" or "the Company") (NASDAQ: CLNT) today announced its
financial results for year ended December
31, 2016.
"This was a year of transition for Cleantech Solutions.
With our forged rolled rings and related components and petroleum
and chemical equipment segments continuing to perform poorly, we
decided the best course of action was to exit these two
segments. Our core dyeing machine business felt the impact of
China's difficult economic
environment." said Mr. Jianhua Wu,
Chairman and CEO of Cleantech Solutions. "We are now focused on
improving the long-term outlook for the dyeing equipment business
by developing next generation dyeing and finishing equipment based
on our recently acquired ozone-ultrasonic patent technology.
However, we expect that our revenues will remain at or about its'
current level in the near future, although declines are
possible. We are also excited about our recent investment in
Wuxi Shengxin New Energy Engineering Co., Ltd. ("Shengxin"), a
newly formed company that plans to build solar farms in
Guizhou and Yunnan provinces."
Full Year 2016 Results
Revenue for 2016 decreased by 40.1% to $17.4 million, compared to $29.0 million for 2015. Our only source of
revenue is our dyeing and finishing business, since our forged
rolled rings and related products and petroleum and chemical
equipment businesses are reflected as discontinued
operations. Revenues declined due to an anticipated slowdown
in shipments of low-emission airflow dyeing machines as many
companies in the dyeing industry had already upgraded to new models
and did not require additional equipment, and orders for new
low-emission airflow dyeing machines slowed down in 2016 as
potential customers for our equipment did not have the financial
resources or credit to purchase our equipment. In addition,
the business was also affected by government actions requiring
textile manufacturers in Zhejiang
province to temporarily cease operations in order to improve air
quality ahead of the G20 Summit in Hangzhou during September 2016.
Gross profit for the 2016 was $2.5
million, compared to gross profit of $6.5 million for 2015. Gross margin was
14.7% during 2016 compared to 22.4% for 2015. The decline in gross
margin for 2016 was primarily attributable to reduced scale of
operations, which is reflected in the allocation of fixed costs,
mainly consisting of depreciation, to cost of revenues, and a
slight increase in raw material costs.
Operating expenses increased by 77.4% to $3.9 million, compared to $2.2 million in 2015. The increase was
primarily due to higher bad debt expense, higher professional fees
in the form of stock-based compensation and an increase in research
and development expenses for the development of new dyeing and
finishing products.
Loss from continuing operations was $1.4
million, or $(1.17) per basic
and diluted share, compared to income from continuing operations of
$3.0 million, or $3.04 per basic and diluted share in 2015.
Loss from discontinued operations (Refer to "Discontinued
Operations" discussion below) was $10.3
million, or $(8.62) per basic
and diluted share, which includes a $6.4
million loss on sales / disposal of discontinued
operations. This compares to loss from discontinued
operations of $15.8 million, or
$(16.01) in 2015.
Net loss for 2016 was $11.7
million, or $(9.79) per basic
and diluted share, compared to net loss of $12.8 million, or $(12.97) per basic and diluted share, in
2015.
Basic and diluted earnings per share were based on 1,189,940 and
985,156 weighted average shares outstanding, respectively, for the
years ended December 31, 2016 and
2015. All share and per share information has been adjusted to
reflect a 1-for-4 reverse stock split effective March 20, 2017.
Financial Condition
As of December 31, 2016, Cleantech
Solutions held cash and cash equivalents of $1.5 million compared to $18.8 million at December
31, 2015. Accounts receivable were $13.9 million compared to $11.7 million at December
31, 2015. Inventories were $2.4
million compared to $1.7
million at December 31,
2015. The Company had $2.7
million in short-term bank loans payable at December 31, 2016, down slightly from
$3.0 million at December 31, 2015. Working capital was
$21.5 million at December 31, 2016 compared to $24.9 million at December
31, 2015. Stockholders' equity was $65.3 million at December
31, 2016.
In 2016, the Company used $6.9
million in cash in operations, primarily due to losses for
the period, the payment of a $5.6
million accrued liability associated with the resolution of
a contract dispute with a former customer in the discontinued
petroleum and chemical segment, and a slowdown in the collections
of accounts receivable.
The Company used $10.5 million in
cash in investing activities, reflecting $9.0 million in payments for a 30% interest in
Shengxin, $2.4 million to purchase of
patent technology use rights covering ozone-ultrasonic textile
dyeing equipment and $1.2 million for
the purchase of property and equipment. This was partially
offset by cash received from the sale of the forged rolled rings
and related components segment of $2.2
million.
Discontinued Operations
On December 30, 2016, the Company
sold 100% of the stock of Wuxi Fulland Wind Energy Equipment Co.,
Ltd. ("Fulland Wind") to an unrelated party and discontinued the
Company's forged rolled rings and related components business.
Additionally, the Company's management decided to discontinue its
petroleum and chemical equipment segment due to significant
declines in revenues and the loss of its major customer. As such,
the assets and liabilities of these two segments have been
classified on the consolidated balance sheet as assets and
liabilities of discontinued operations as of December 31, 2016 and 2015 and the operating
results have been classified as discontinued operations in the
consolidated statements of operations for all years presented.
Recent Events
In March 2017, the Company sold
certain manufacturing equipment that were previously used in the
discontinued petroleum and chemical segment. These assets
amounted to approximately $1.1
million, which were included in the assets of discontinued
operations on the consolidated balance sheets at December 31, 2016
As discussed above, in December
2016, the Company's variable interest entity, Wuxi Huayang
Dyeing Machinery Co., Ltd. ("Dyeing") and Xue Miao, an unrelated individual, formed
Shengxin, in which the Dyeing has a 30% equity interest and the Mr.
Xue holds a 70% interest. Pursuant to the agreement, Dyeing
invested RMB60 million (approximately
$8.6 million) and Mr. Xue has
committed to invest RMB140 million
(approximately $20.2 million).
Shengxin intends to develop, construct and maintain photovoltaic
power generation projects, known as solar farms, in China, mainly in the provinces of Guizhou and Yunnan. The agreement provides that the
Company will have priority to supply components and equipment such
as solar racking and mounting systems for the projects under the
same conditions as the other vendors.
As discussed above, in December
2016, the Company sold the stock of its subsidiary Fulland
Wind to a third party for a sales price of RMB48 million (approximately $6.9 million). The Company's forging and
related components business was conducted through Fulland Wind. The
purchase price is payable in three installments with the first
installment of RMB14.4 million
(approximately $2.1 million) received
on December 28, 2016. A second
installment of RMB14.4 million
(approximately $2.1 million) is due
within six months after the transfer registration formalities are
completed and, if the equity transfer registration formalities are
completed within one year without any third party claims on the
equity transfer, a final payment of RMB19.2
million (approximately $2.7
million) is due 25 working days after the expiration of such
period. The Company expects the final payment to be received
by the end of 2017. Contemporaneously with the sale of
Fulland Wind stock, the Company leased a factory building to the
new owner of Fulland Wind. The lease has a ten-year term,
commencing January 1, 2017. As
of December 31, 2016, Fulland Wind
had bank loans payable of RMB 4.5
million (approximately $0.6
million) which are still guaranteed by Dyeing and by the
Company's chief executive officer and his wife. The buyer of
Fulland Wind has not obtained the release by Dyeing or the
Company's chief executive officer and his wife of their
guarantees.
About Cleantech Solutions International
Cleantech Solutions, through its affiliated companies, designs,
manufactures and distributes a line of proprietary high and low
temperature dyeing and finishing machinery to the textile
industry.
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 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 business of Shengxin involves a high degree of risk, the
Company does not have any control over the operations of Shengxin,
and the Company can give no assurance as to whether Shengxin will
ever generate revenue or positive cash flow or whether the Company
can or will supply components to Shengxin. 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, 2016. 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.
Ryan Hua, Vice President of
Operations
Phone: +86-510-8339-7559
Web: www.cleantechsolutionsinternational.com
Compass Investor Relations
Elaine Ketchmere, CFA
Email: eketchmere@compass-ir.com
Phone: +1-310-528-3031
Web: www.compassinvestorrelations.com
CLEANTECH
SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
For the Years
Ended
|
|
|
|
|
December
31,
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
REVENUES
|
$
|
17,364,332
|
$
|
29,010,950
|
COST OF
REVENUES
|
|
14,817,880
|
|
22,514,339
|
GROSS
PROFIT
|
|
2,546,452
|
|
6,496,611
|
OPERATING
EXPENSES:
|
|
|
|
|
|
Depreciation
|
|
517,935
|
|
587,981
|
|
Selling, general and
administrative
|
|
1,999,067
|
|
1,540,659
|
|
Bad debt expense
(recovery)
|
|
1,037,874
|
|
(52,091)
|
|
Research and
development
|
|
304,054
|
|
98,780
|
|
|
Total operating
expenses
|
|
3,858,930
|
|
2,175,329
|
(LOSS) INCOME FROM
OPERATIONS
|
|
(1,312,478)
|
|
4,321,282
|
OTHER INCOME
(EXPENSE):
|
|
|
|
|
|
Interest
income
|
|
24,342
|
|
21,131
|
|
Interest
expense
|
|
(124,937)
|
|
(144,056)
|
|
Foreign currency
transaction gain (loss)
|
|
166
|
|
(10)
|
|
Other
income
|
|
19,685
|
|
17,182
|
|
|
Total other expense,
net
|
|
(80,744)
|
|
(105,753)
|
(LOSS) INCOME FROM
CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(1,393,222)
|
|
4,215,529
|
|
Income taxes
provision
|
|
-
|
|
1,217,375
|
(LOSS) INCOME FROM
CONTINUING OPERATIONS
|
(1,393,222)
|
|
2,998,154
|
DISCONTINUED
OPERATIONS:
|
|
|
|
|
|
Loss from
discontinued operations, net of income taxes
|
(3,826,525)
|
|
(15,768,376)
|
|
Loss on sale /
disposal of discontinued operations, net of income taxes
|
|
(6,435,854)
|
|
-
|
|
Loss from
discontinued operations, net of income taxes
|
(10,262,379)
|
|
(15,768,376)
|
NET LOSS
|
$
|
(11,655,601)
|
$
|
(12,770,222)
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS:
|
|
|
|
|
|
Net loss
|
$
|
(11,655,601)
|
$
|
(12,770,222)
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
Unrealized foreign
currency translation loss
|
|
(4,843,175)
|
|
(4,769,009)
|
|
Comprehensive
loss
|
$
|
(16,498,776)
|
$
|
(17,539,231)
|
|
|
|
|
|
|
|
NET (LOSS) INCOME PER
COMMON SHARE:
|
|
|
|
|
|
Continuing operations
- Basic and diluted
|
$
|
(1.17)
|
$
|
3.04
|
|
Discontinued
operations - basic and diluted
|
|
(8.62)
|
|
(16.01)
|
|
Net loss per common
share - basic and diluted
|
$
|
(9.79)
|
$
|
(12.97)
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING:
|
|
|
|
Basic and
diluted
|
|
1,189,940
|
|
985,156
|
CLEANTECH
SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,481,498
|
$
|
18,790,370
|
|
Restricted
cash
|
|
551,047
|
|
647,080
|
|
Notes
receivable
|
|
133,913
|
|
132,497
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
13,922,371
|
|
11,671,902
|
|
Inventories, net of
reserve for obsolete inventories
|
|
2,394,179
|
|
1,667,048
|
|
Advances to
suppliers
|
|
1,116,525
|
|
434,409
|
|
Deferred tax
assets
|
|
386,381
|
|
220,895
|
|
Receivable from sale
of subsidiary
|
|
4,838,152
|
|
-
|
|
Prepaid expenses and
other
|
|
9,074
|
|
10,285
|
|
Assets of
discontinued operations
|
|
1,758,986
|
|
5,898,238
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
26,592,126
|
|
39,472,724
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
Equity method
investment
|
|
8,610,759
|
|
-
|
|
Property and
equipment, net
|
|
29,878,675
|
|
34,634,956
|
|
Assets of
discontinued operations - property and equipment, net
|
-
|
|
17,119,008
|
|
Intangible assets,
net
|
|
5,283,695
|
|
3,382,071
|
|
|
|
|
|
|
|
|
|
Total other
assets
|
|
43,773,129
|
|
55,136,035
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
70,365,255
|
$
|
94,608,759
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
Short-term bank
loans
|
$
|
2,159,889
|
$
|
2,388,032
|
|
Bank acceptance notes
payable
|
|
547,172
|
|
647,080
|
|
Accounts
payable
|
|
864,870
|
|
1,890,475
|
|
Accrued
expenses
|
|
368,395
|
|
610,834
|
|
Advances from
customers
|
|
427,446
|
|
403,778
|
|
VAT and service taxes
payable
|
|
47,319
|
|
186,692
|
|
Income taxes
payable
|
|
79,467
|
|
259,987
|
|
Liabilities of
discontinued operations
|
|
558,661
|
|
8,154,749
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
5,053,219
|
|
14,541,627
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
5,053,219
|
|
14,541,627
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
Preferred stock
($0.001 par value; 10,000,000 shares authorized;
|
|
|
No shares issued and
outstanding at December 31, 2016 and 2015)
|
-
|
|
-
|
|
Common stock ($0.001
par value; 12,500,000 shares authorized;
|
|
|
1,415,441 and 985,997
shares issued and outstanding
|
|
|
|
|
at December 31, 2016
and 2015, respectively)
|
|
1,415
|
|
986
|
|
Additional paid-in
capital
|
|
35,549,542
|
|
33,806,291
|
|
Retained
earnings
|
|
26,555,051
|
|
37,007,776
|
|
Statutory
reserve
|
|
2,352,592
|
|
3,555,468
|
|
Accumulated other
comprehensive income - foreign currency translation
adjustment
|
853,436
|
|
5,696,611
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
65,312,036
|
|
80,067,132
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
70,365,255
|
$
|
94,608,759
|
CLEANTECH
SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
For the Years
Ended
|
|
|
|
|
December
31,
|
|
|
|
|
2016
|
|
2015
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net loss
|
$
|
(11,655,601)
|
$
|
(12,770,222)
|
|
Adjustments to
reconcile net loss from operations to net cash
|
|
|
|
|
(used in) provided by
operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
3,829,345
|
|
4,364,166
|
|
|
Depreciation -
discontinued operations
|
|
1,723,611
|
|
3,764,639
|
|
|
Amortization of
intangible assets
|
|
189,329
|
|
95,076
|
|
|
Increase (decrease)
in allowance for doubtful accounts
|
2,756,411
|
|
(45,979)
|
|
|
Increase in allowance
for doubtful accounts - discontinued operations
|
-
|
|
2,107,570
|
|
|
Increase in reserve
for obsolete inventories - discontinued operations
|
-
|
|
962,029
|
|
|
Loss on sale of
subsidiary of discontinued operations
|
|
6,435,855
|
|
-
|
|
|
Loss from impairment
of property and equipment - discontinued operations
|
1,660,305
|
|
7,016,658
|
|
|
Loss from sales
contract dispute - discontinued operations
|
-
|
|
5,806,778
|
|
|
Stock-based
compensation and fees
|
|
927,206
|
|
285,560
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Notes
receivable
|
|
(10,537)
|
|
(25,734)
|
|
|
Accounts
receivable
|
|
(5,906,749)
|
|
1,172,679
|
|
|
Inventories
|
|
(874,055)
|
|
1,469,282
|
|
|
Prepaid and other
current assets
|
|
6,070
|
|
102,824
|
|
|
Advances to
suppliers
|
|
(742,745)
|
|
(369)
|
|
|
Deferred tax
assets
|
|
(188,090)
|
|
13,023
|
|
|
Assets of
discontinued operations
|
|
2,659,512
|
|
(1,232,440)
|
|
|
Accounts
payable
|
|
(958,163)
|
|
(707,293)
|
|
|
Accrued
expenses
|
|
(173,031)
|
|
(82,642)
|
|
|
VAT and service taxes
payable
|
|
(132,933)
|
|
(40,757)
|
|
|
Income taxes
payable
|
|
(170,936)
|
|
(322,753)
|
|
|
Advances from
customers
|
|
52,341
|
|
(67,055)
|
|
|
Liabilities of
discontinued operations
|
|
(6,375,676)
|
|
(133,758)
|
|
|
|
|
|
|
|
Net cash (used in)
provided by operating activities
|
|
(6,948,531)
|
|
11,731,282
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Purchase of patent
use rights
|
|
(2,408,369)
|
|
-
|
|
Purchase of property
and equipment
|
|
(1,209,477)
|
|
(12,458)
|
|
Payments made for
equity method investment
|
|
(9,001,279)
|
|
-
|
|
Cash received from
sale of subsidiary
|
|
2,167,532
|
|
-
|
|
|
|
|
|
|
|
Net cash used in
investing activities
|
|
(10,451,593)
|
|
(12,458)
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Proceeds from bank
loans
|
|
3,763,077
|
|
4,503,418
|
|
Repayments of bank
loans
|
|
(3,838,338)
|
|
(4,342,581)
|
|
Decrease (increase)
in restricted cash
|
|
60,209
|
|
(193,004)
|
|
Decrease (increase)
in restricted cash - discontinued operations
|
(67,735)
|
|
-
|
|
(Decrease) increase
in bank acceptance notes payable
|
(60,209)
|
|
193,004
|
|
Proceeds from sale of
common stock
|
|
753,400
|
|
-
|
|
|
|
|
|
|
|
Net cash provided by
financing activities
|
|
610,404
|
|
160,837
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(519,152)
|
|
(925,082)
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
(17,308,872)
|
|
10,954,579
|
|
|
|
|
|
|
|
Cash and cash
equivalents - beginning of year
|
|
18,790,370
|
|
7,835,791
|
|
|
|
|
|
|
|
Cash and cash
equivalents - end of year
|
$
|
1,481,498
|
$
|
18,790,370
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
Cash paid in
continuing operations for:
|
|
|
|
|
|
|
Interest
|
$
|
166,935
|
$
|
195,003
|
|
|
Income
taxes
|
$
|
360,318
|
$
|
1,740,343
|
|
|
|
|
|
|
|
|
Cash paid in
discontinued operations for:
|
|
|
|
|
|
|
Interest
|
$
|
48,250
|
$
|
40,363
|
|
|
Income
taxes
|
$
|
189,570
|
$
|
536,954
|
|
|
|
|
|
|
|
NON-CASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
Stock issued for
future services
|
$
|
9,074
|
$
|
-
|
|
Stock issued for
accrued liabilities
|
$
|
54,000
|
$
|
-
|
|
|
|
|
|
|
|
|
Property and
equipment acquired on credit as payable
|
$
|
15,263
|
$
|
-
|
|
Decrease in assets
upon sale of subsidiary
|
$
|
14,673,414
|
$
|
-
|
|
Decrease in
liabilities upon sale of subsidiary
|
$
|
1,012,452
|
$
|
-
|
|
Increase in
receivable from sale of subsidiary
|
$
|
7,225,107
|
$
|
-
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cleantech-solutions-international-reports-full-year-2016-results-300440115.html
SOURCE Cleantech Solutions International, Inc.