CHINA CLEAN ENERGY INC. 
By FUQING CITY, China, Nov. 15, 2010 /PRNewswire-Asia-FirstCall/ -- China Clean Energy Inc. (OTC Bulletin Board: CCGY) ("China Clean Energy", the "Company"), a producer of biodiesel fuel and environmentally-friendly specialty-chemical products made from renewable resources in China, today reported its financial results for the third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
-- Revenue totaled $16.0 million, up 300% from the same period in 2009 and
up 12.9% from the second quarter 2010
-- Gross profit totaled $3.7 million, up 382% from the same period in 2009
and up 35.4% from the second quarter 2010
-- Gross margin was 23.2%, compared to 19.3% in the same period in 2009 and
19.4% in the second quarter 2010
-- Operating income was $3.2 million, up 1,046% from the same period in
2009 and up 51.1% from the second quarter 2010
-- Net income was $1.8 million, or $0.06 per fully-diluted share, compared
to a net loss of $0.7 million in the third quarter 2009
-- Adjusted net income, excluding change in fair value of warrant
liabilities and stock-based compensation, was $2.2 million, or $0.07 per
fully-diluted share, compared to adjusted net income of $0.3 million, or
$0.01 per fully-diluted share in the third quarter 2009
-- Cash and cash equivalents totaled $9.1 million at the end of September
2010, compared to $4.2 million at year-end 2009 and $7.3 million at the
end of June 2010
Nine months 2010 Highlights
-- Revenue totaled $40.8 million, up 270% from the same period in 2009
-- Gross profit totaled $7.9 million, up 288% from the same period in 2009
-- Gross margin was 19.4%, compared to 18.5% in the same period in 2009
-- Operating income was $6.4 million, up 931% from the same period in 2009
-- Net income was $4.1 million, or $0.13 per fully-diluted share, compared
to a net loss of $1.0 million, or $0.03 per fully-diluted share in the
nine months 2009
"In the third quarter we again delivered results that exceeded our expectations as we continued to successfully ramp production at our Jiangyin plant," said Mr. Tai-ming Ou, China Clean Energy's Chairman and CEO. "Our record results for the quarter were driven by higher volume and improved margins in our specialty chemicals business as we increased sales of high margin products such as high-purity dimer acid and multi-purpose hot melt adhesive, and raised prices of some other of our specialty chemical products to reflect our improved quality, as we benefited from strong demand from our existing customer base. Looking ahead, demand for our products remains strong and we expect to sustain our growth momentum into the fourth quarter."
Third Quarter 2010 Results
Net revenue in the third quarter was $16.0 million, up 300% from the third quarter 2009. The year over year increase in revenue was driven by higher sales volume and higher average selling prices for both specialty chemicals and biodiesel product segments. Specialty chemicals sales volume was up 233% year-over-year to 8,935 tons, and average selling price was up 16.4% year-over-year to RMB 10,432 per ton. Biodiesel sales volume was up 320% to 3,213 tons in the third quarter 2010, and average selling price was up 13.0% in the same period to RMB 4,639 per ton. Specialty-chemicals and biodiesel represented 86% and 14% of net revenue in the quarter, respectively. Exports totaled $2.4 million, representing 14.9% of total revenue.
Gross profit in the third quarter 2010 was $3.7 million, up 382% from the third quarter 2009. The increase in gross profit was mostly driven by the increase in revenue and the improved gross margin. Gross margin was 23.2% in the third quarter 2010, compared to 19.3% in the same period in 2009 and 19.4% in the second quarter 2010. The year-over-year and sequential improvement in gross margin is due to a higher margin product mix and higher average selling prices for both specialty chemicals as well as biodiesel.
Operating expense in the third quarter 2010 was $0.5 million representing a 4.1% decrease from the third quarter 2009. The decrease in operating expense is the result of lower administrative expense only partially offset by higher sales and marketing and research and development expense.
Operating income in the third quarter 2010 was $3.2 million, up 1046% from the third quarter 2009. Operating margin for the third quarter 2010 was 20.3%, compared to 7.1% in the same period of 2009.
Other expenses totaled $659,860, including $252,431 associated with change in fair value of warrant liabilities and $103,386 in net interest expense. Tax provision for the quarter totaled $738,299.
Net income for the third quarter 2010 was $1.8 million, or $0.06 per fully-diluted share, compared to a net loss of $0.7 million in the third quarter 2009 and net income of $1.9 million, or $0.06 per fully-diluted share in the second quarter 2010. Net income for the third quarter includes $252,431 and $106,315 non-cash expenses to account for change in the value of warrant liabilities and stock-based compensation, respectively.
Adjusted net income excluding the change in value of warrant liabilities and stock-based compensation totaled $2.2 million or $0.07 per fully-diluted share, compared to net income of $0.3 million, or $0.01 per fully-diluted share in the third quarter 2009 and net income of $1.7 million, or $0.05 per fully-diluted share in second quarter 2010. For a complete reconciliation of adjusted financial information to nearest GAAP equivalent, please see the table elsewhere in this press release.
Nine Months 2010 Results
Revenue for the first nine months of 2010 was $40.8 million, up 270% from revenue of $11.1 million for the first nine months of 2009. Gross profit was $7.9 million, up 288% from gross profit of $2.0 million for the nine months of 2009. Gross margin was 19.4%, compared to 18.5% for the first nine months of 2009. Net income was $4.1 million, or $0.13 per fully-diluted share, compared to a net loss of $1.0 million, or $0.03 per fully-diluted share in the nine months 2009. After adjusting for the changes in fair value of warrant liabilities and stock-based compensation, non-GAAP net income for the first nine months of 2010 was $4.7 million, or $0.15 per fully-diluted share, an increase of 551% from $0.7 million in the corresponding period of 2009, or $0.02 per fully-diluted share.
Financial Condition
As of September 30, 2010, China Clean Energy had $9.1 million in total cash, approximately $13.3 million in working capital, and $5.1 million in total debt. Stockholders' equity at September 30, 2010 stood at $36.6 million, or approximately $1.2 per share.
Business Outlook
China Clean Energy's Jiangyin plant produced 8,935 tons of specialty chemicals and 3,213 tons of biodiesel in the third quarter of 2010, representing 89% and 26% of the estimated full capacity, respectively. Jiangyin plant's output in the quarter accounted for approximately 90% in total volume and 88% in total revenue.
Mr. Ou added, "Based on our existing order book, we expect to deliver revenue of approximately $17.3 million in the fourth quarter 2010, representing an increase of approximately 253% over the fourth quarter 2009. Operating income is expected to reach $3.5 million, up from $0.3 million in the fourth quarter 2009. For the full year 2010, our revenue is expected to reach $58.1 million, representing a year-over-year increase of 265%; our operating income is expected to reach $9.9 million, compared to $0.9 million in 2009. We also remain committed to list our shares on a senior U.S. exchange, and hope to announce our progress towards this goal in the weeks ahead."
Recent Developments
During the third quarter of 2010, the Company has successfully transferred and installed plant and equipment representing all biodiesel capacity and all specialty chemicals capacity except the printing ink production line to the new Jiangyin plant. As a result, the annual production capacity in the Jiangyin Plant is now 50,000 tons of biodiesel and 40,000 tons of specialty chemicals. The printing ink production line will remain which accounts for approximately 500 tons annual production capacity will remain at the old plant.
Conference Call
China Clean Energy will hold its third quarter 2010 conference call for all interested persons at 9:00 a.m. Eastern Time on Monday, November 15, 2010 to discuss its results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (877) 411-1651. International callers should dial +1 (706) 679-8912. When prompted by the operator, mention conference pass code 23974364. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, November 15, 2010, at 11:00 a.m. eastern time. To access the replay, please dial +1 (800) 642-1687, international callers dial +1 (706) 645-9291, and enter the pass code 23974364.
About China Clean Energy
China Clean Energy, through its wholly-owned subsidiaries, Fujian Zhongde Technology Co., Ltd. and Fujian Zhongde Energy Co., Ltd, is engaged in the development, manufacturing, and distribution of biodiesel and specialty chemical products made from renewable resources. For additional information please visit: http://www.chinacleanenergyinc.com
Safe Harbor Statement
This announcement contains forward-looking statements. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the effectiveness, profitability, and the marketability of the Company's products; the future trading of the common stock of the Company; the ability of the Company to capitalize on its expanded production capacity; the period of time for which its current liquidity will enable the Company to fund its operations; the Company's ability to protect its proprietary information; general economic and business conditions; the volatility of the Company's operating results and financial condition resulting from changes in raw material prices, international oil prices and price controls imposed by the Chinese government; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that the Company's expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME (LOSS)
(UNAUDITED)
Three months ended
September 30,
2010 2009
---- ----
REVENUES $15,966,951 $3,988,916
Less: cost of goods sold 12,258,337 3,219,875
GROSS PROFIT 3,708,614 769,041
--------- -------
OPERATING EXPENSES
Selling and marketing 97,696 92,789
General and administrative 332,887 365,798
Research and development 35,365 27,523
Total operating expenses 465,948 486,110
------- -------
INCOME FROM OPERATIONS 3,242,666 282,931
--------- -------
OTHER INCOME (EXPENSE)
Interest expense, net (103,386) (7,175)
Impairment loss on assets held for sale (257,391) -
Other income (expense) (46,852) 2,569
Change in fair value of warrant
liabilities (252,231) (965,965)
Total other expenses (659,860) (970,571)
-------- --------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 2,582,806 (687,640)
Provision for income taxes 738,299 44,032
NET INCOME (LOSS) 1,844,507 (731,672)
COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment 495,457 43,544
------- ------
COMPREHENSIVE INCOME (LOSS) $2,339,964 $(688,128)
========== =========
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE
Weighted average number of shares 31,512,269 31,512,269
========== ==========
Earnings per share $0.06 $(0.02)
===== ======
Nine months ended
September 30,
2010 2009
---- ----
REVENUES $40,845,079 $11,054,925
Less: cost of goods sold 32,910,770 9,011,767
GROSS PROFIT 7,934,309 2,043,158
--------- ---------
OPERATING EXPENSES
Selling and marketing 269,177 237,215
General and administrative 1,207,336 1,104,445
Research and development 79,743 83,135
Total operating expenses 1,556,256 1,424,795
--------- ---------
INCOME FROM OPERATIONS 6,378,053 618,363
--------- -------
OTHER INCOME (EXPENSE)
Interest expense, net (271,384) (6,619)
Impairment loss on assets held for sale (257,391) -
Other income (expense) (32,211) (3,353)
Change in fair value of warrant
liabilities (246,478) (1,353,563)
Total other expenses (807,464) (1,363,535)
-------- ----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 5,570,589 (745,172)
Provision for income taxes 1,426,320 206,816
NET INCOME (LOSS) 4,144,269 (951,988)
COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment 523,874 (3,517)
------- ------
COMPREHENSIVE INCOME (LOSS) 4,668,143 $(955,505)
========= =========
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE
Weighted average number of shares 31,512,269 31,512,269
========== ==========
Earnings per share 0.13 $(0.03)
==== ======
See accompanying notes to unaudited condensed consolidated financial
statements
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME TO NET INCOME
The management of China Clean Energy uses non-GAAP adjusted net earnings to measure the performance of the Company's business internally by excluding non-recurring items as well as non-cash charges related to the warrants issued in connection with the Company's 2008 Private Placement offering. The Company's management believes that these non-GAAP adjusted financial measures allow the management to focus on managing business operating performance because these measures reflect the essential operating activities of China Clean Energy and provide a consistent method of comparison to historical periods. The Company believes that providing the non-GAAP measures - which management uses internally - to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods without variation of non-recurring items and non-operating related charges. In addition, it allows investors to better evaluate the Company's performance using the same methodology and information as those used by the management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, the management of China Clean Energy compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides the non-GAAP financial measure and a reconciliation of the non-GAAP measure to the GAAP net income.
Three months ended September
30,
-----------------------------
2010 2009
---- ----
Net Income (Loss) $1,844,507 $(731,672)
Add back (Deduct):
Change in fair value of
warrant $252,231 $965,965
Stock-based
compensation $106,315 $83,030
Adjusted Net Income $2,203,053 $317,323
Diluted EPS $0.06 $(0.02)
Add back (Deduct):
Change in fair value of
warrant $0.01 $0.03
Stock-based
compensation $0.00 $0.00
Adjusted EPS $0.07 $0.01
Nine months ended September 30,
-------------------------------
2010 2009
---- ----
Net Income (Loss) $4,144,269 $(951,988)
Add back (Deduct):
Change in fair value of
warrant $246,478 $1,353,563
Stock-based
compensation $318,945 $321,553
Adjusted Net Income $4,709,692 $723,128
Diluted EPS $0.13 $(0.03)
Add back (Deduct):
Change in fair value of
warrant $0.01 $0.04
Stock-based
compensation $0.01 $0.01
Adjusted EPS $0.15 $0.02
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
September December
30, 31,
ASSETS 2010 2009
------ ---- ----
CURRENT ASSETS
Cash and cash equivalents $9,114,282 $4,154,814
Restricted cash 474,729 -
Accounts receivable, net of allowance for
doubtful accounts of $53,653 and $93,761 3,260,396 1,766,952
Other current assets 12,833 11,000
Deferred tax assets 102,908 69,466
Tax Receivable 267,019 -
Inventories 4,589,675 464,842
Advances for inventory purchases 899,674 188,659
------- -------
Total current assets 18,721,516 6,655,733
Plant and Equipment, net 24,119,600 25,119,034
Machinery and equipment held for sale 106,692 -
Intangible assets. Net 4,799,171 4,860,645
TOTAL ASSETS $47,746,979 $36,635,412
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $1,564,780 $157,433
Accrued liabilities 243,651 279,516
Customer deposits 54,744 71,090
Taxes payable 1,049,645 130,287
Banker acceptances 1,598,278 -
Bank loan payable - current portion 905,454 3,080,700
------- ---------
Total current liabilities 5,416,552 3,719,026
Warrants liability 1,506,252 1,259,774
Bank loan payable - net of current portion 4,180,400 -
Total liabilities 11,103,204 4,978,800
---------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.001 per share,
authorized 10,000,000 shares, no shares
issued and outstanding as of September 30,
2010 and December 31, 2009, respectively - -
Common stock, par value $0.001 per share,
authorized 90,000,000 shares, 31,512,269
shares issued and outstanding as of
September 30, 2010 and December 31, 2009,
respectively 31,512 31,512
Additional paid-in capital 12,739,468 12,420,523
Statutory reserves 1,630,882 1,630,882
Retained earnings 18,552,010 14,407,448
Accumulated other comprehensive income 3,689,903 3,166,247
--------- ---------
Total shareholders' equity 36,643,775 31,656,612
Total liabilities and shareholders' equity $47,746,979 $36,635,412
=========== ===========
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
2010 2009
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $4,144,269 $(951,988)
Adjusted to reconcile net
income (loss) to cash provided
by operating activities:
Depreciation 1,577,712 532,442
Recovery of allowance for
doubtful accounts (40,108) (66,606)
Amortization of intangible
assets 145,445 160,088
Stock-based compensation
expense 318,945 321,553
Loss on impairment on assets
held for sale 257,391 -
Change in warrant liabilities 246,478 1,353,563
Deferred tax provision (33,442) -
Changes in operating assets and
liabilities
Accounts receivable (1,453,337) (92,744)
Inventories (4,124,833) (113,488)
Other assets (1,833) -
Advances for inventory and
other current assets (711,015) (141,359)
Accounts payable 1,407,348 (14,400)
Accrued liabilities (35,865) (158,784)
Customer deposits (16,346) 49,741
Taxes payables 919,358 (161,306)
Taxes receivable (267,019) -
Net cash provided by operating
activities 2,333,148 716,712
--------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Addition to construction in
progress - (2,277,979)
Purchase of equipment (246,210) (11,753)
Net cash used in investing
activities (246,210) (2,289,732)
-------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Restricted cash (474,729) (244,761)
Short-term notes payable - 244,761
Proceeds from bank loans 4,339,354 3,078,390
Proceeds from banker
acceptances 1,598,278 -
Payments on bank loans (2,334,200) (257,667)
Net cash provided by financing
activities 3,128,703 2,820,723
--------- ---------
EFFECT OF EXCHANGE RATE ON CASH (256,173) (3,040)
-------- ------
INCREASE IN CASH AND CASH
EQUIVALENTS 4,959,468 1,244,663
CASH AND CASH EQUIVALENTS,
beginning of period 4,154,814 2,913,711
CASH AND CASH EQUIVALENTS, end
of period $9,114,282 4,158,374
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest expenses paid $224,620 $ -
========
Income taxes paid $787,834 $210,271
======== ========
Contact:
China Clean Energy Inc. CCG Investor Relations Inc.
William Chen, CFO Ed Job, CFA
Email:
william.chen@chinacleanenergyinc.com Phone: +86-138-1699-7314
Website:
http://www.chinacleanenergyinc.com Email: ed.job@ccgir.com
Raymond M. Campos, Sr. MI
Executive
Phone: +1-310-954-1354
Email: raymond.campos@ccgir.com
Website:
http://www.ccgirasia.comSOURCE China Clean Energy Inc.
