China Natural Gas Announces First Quarter 2012 Financial Results
- First Quarter 2012 revenue increased by 33.9% year-over-year to $32.28 million -

XI'AN, China, May 15, 2012 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (PINK: 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 first quarter ended March 31, 2012.

First Quarter 2012 Results

Revenue in the first quarter of 2012 increased by 33.9% to $32.28 million from $24.11 million in the first quarter of 2011, driven by our LNG production facility in Jingbian County, Shaanxi Province started operations , and the increase in the number of residential and commercial pipeline customers from 115,787 to 117,270 over the period. Sales revenue of natural gas grew by 44.5% year-over-year to $29.40 million, from $20.35 million in the first quarter of 2011. Gasoline revenue in the first quarter of 2012 decreased by 36.8% to $0.83 million, from $1.31 million in the same period of the prior year, mainly because 3 gasoline stations were closed during the second quarter and fourth quarter of 2011. Installation and automobile conversion services revenue decreased by 16.4% year-over-year to $2.05 million, from $2.45 million a year ago. In the first quarter of 2012, sales of natural gas, gasoline, and installation and automobile conversion services contributed 91.1%, 2.6%, and 6.3% of total revenue, respectively.

Gross profit in the first quarter of 2012 increased 16.9% to $11.36 million from $9.72 million in the same period of the prior year. Gross margin in the first quarter of 2012 was 35.2%, compared to 40.3% a year ago. Gross margin decreased primarily due to the current lower gross margin level of our LNG business, as compared to the gross margins of those business lines making greatest contribution to revenue.

Operating income in the first quarter of 2012 was $3.70 million, an increase of 14.6% year-over-year from $3.23 million, primarily attributable to the realization of revenue and gross profit of LNG, which started in July 2011..

Income tax expense was $0.79 million at an effective tax rate of 28.9%, as compared to $0.96 million at an effective tax rate of 27.8% in the first quarter of 2011.  The decrease was primarily due to lower income before income tax for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The effective income tax rate increased from 27.8% to 28.9% over this period, primarily attributable to foreign currency exchange loss related to the Abax Senior Notes, which was not subject to income tax because we had incurred a net operating loss for income tax purpose for the three months ended March 31, 2012.

Net income in the first quarter of 2012 decreased by 21.6% to $1.95 million, or $0.10 per diluted share, from $2.49 million, or $ 0.12 per diluted share, in the first quarter of 2011.

As of March 31, 2012, the Company had $7.01 million of cash and cash equivalents on hand, compared to $9.62 million of cash and cash equivalents as of December 31, 2011. The decrease was primarily attributable to the construction of the LNG plant and other projects, and the repayment of the loans from Shanghai Pudong Development Bank and of the principal of the Abax Senior Notes.

Net cash provided by operating activities was $7.42 million for the first quarter of 2012, as compared to net cash provided by operations of $2.46 million for the first quarter of 2011.  The increase was primarily due to the decrease in prepaid expense and other current assets, and increase in unearned revenue, and adjustments for non-cash expense items, including depreciation and amortization expenses, offset mainly by the increase in advances to suppliers and in other receivables.

About China Natural Gas, Inc.

China Natural Gas (http://www.naturalgaschina.com ) 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 25 CNG fueling stations in Shaanxi Province, 12 CNG fuelling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) distribution and sales of CNG through Company-owned CNG fueling stations serving hybrid (natural gas/gasoline) powered vehicles; (2) installation, distribution and sales of piped natural gas to residential and commercial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) distribution and sales of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles at its automobile conversion workshops.

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 fourth 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.

 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)




March 31,



December 31,




2012



2011











ASSETS









CURRENT ASSETS:









Cash and cash equivalents


$

7,007,512



$

9,622,883


Restricted cash



792,000




-


Accounts receivable, net



1,780,849




2,997,845


Other receivables, net



1,457,428




540,646


Employee advances



375,733




285,270


Inventories



1,827,300




1,938,754


Advances to suppliers



7,522,638




4,540,139


Prepaid expense and other current assets



1,356,542




4,470,687


Total current assets



22,120,002




24,396,224











Investment in unconsolidated joint ventures



1,584,000




1,574,000


Property and equipment, net



190,730,403




174,097,754


Construction in progress



40,193,213




45,882,320


Deferred financing cost, net



414,876




517,334


Goodwill



633,730




629,729


Other intangible assets



20,256,737




18,910,244


Prepaid expenses and other assets



4,383,267




10,976,203


TOTAL ASSETS


$

280,316,228



$

276,983,808











LIABILITIES AND STOCKHOLDERS' EQUITY


















CURRENT LIABILITIES:









Senior notes- current maturities


$

13,164,008



$

9,671,682


Current portion of bank loan payable



5,544,000




4,722,000


Accounts payable and accrued liabilities



8,756,354




7,694,423


Other payable - related party



1,734,633




787,000


Short-term borrowing - related party



2,679,945




1,359,945


Unearned revenue



5,664,122




4,280,594


Accrued interest



544,726




1,029,431


Taxes payable



2,055,813




2,626,271


Total current liabilities



40,143,601




32,171,346











LONG-TERM LIABILITIES:









Senior notes, net of current portion



19,746,011




25,791,151


Bank loan payable, net of current portion



7,920,000




9,444,000


Borrowings - related party



-




1,320,000


Warrants liability



17,500,000




17,500,000


Total long-term liabilities



45,166,011




54,055,151


Total liabilities



85,309,612




86,226,497











COMMITMENTS AND CONTINGENCIES


















STOCKHOLDERS' EQUITY:









Preferred stock, par value $0.0001 per share, 5,000,000 authorized,
    none issued and outstanding



-




-


Common stock, par value $0.0001 per share, 45,000,000 authorized,
   21,458,654 and 21,458,654 issued and outstanding at March 31, 2012
   and December 31, 2011, respectively



2,145




2,145


Additional paid-in capital



83,057,523




82,909,485


Accumulated other comprehensive income



21,576,294




19,817,493


Statutory reserves



10,529,185




10,124,710


Retained earnings



79,674,808




77,903,478


 Total China Natural Gas, Inc. stockholders' equity



194,839,955




190,757,311


Noncontrolling interests



166,661




-


Total stockholders' equity



195,006,616




190,757,311


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

280,316,228



$

276,983,808


 

 

 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(Unaudited)




For the Three Months Ended March 31,




2012



2011









Revenue









Natural gas


$

29,399,687



$

20,347,829


Gasoline



825,895




1,307,174


Installation and other



2,051,736




2,453,105





32,277,318




24,108,108











Cost of revenue









Natural gas



19,274,859




12,099,451


Gasoline



788,144




1,224,724


Installation and other



852,245




1,063,632





20,915,248




14,387,807











Gross profit



11,362,070




9,720,301











Operating expenses









Selling



4,950,800




3,579,921


General and administrative



2,711,646




2,910,971





7,662,446




6,490,892











Income from operations



3,699,624




3,229,409











Other income (expense)









Interest income



10,746




6,649


Interest expense



(432,037)




(4,668)


Other income (expense), net



(33,093)




96,956


Change in fair value of warrants



(83)




116,180


Foreign currency exchange loss



(505,940)




(3,042)





(960,407)




212,075











Income before income tax



2,739,217




3,441,484











Provision for income tax



791,471




955,653











Net income



1,947,746




2,485,831


Less: Loss attributable to noncontrolling interests



(228,059)




-


Net income attributable to China Natural Gas, Inc.



2,175,805




2,485,831











Other comprehensive income









Foreign currency translation gain



1,758,800




1,448,655


Comprehensive income


$

3,934,605



$

3,934,486











Weighted average shares outstanding









Basic



21,458,654




21,321,904


Diluted



21,458,654




21,358,755











Earnings per share









Basic


$

0.10



$

0.12


Diluted


$

0.10



$

0.12


 

 

CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 




For the Three Months Ended March 31,




2012



2011









CASH FLOWS FROM OPERATING ACTIVITIES:









Net income attributable to China Natural Gas, Inc.


$

2,175,805



$

2,485,831


Add: Loss attributable to noncontrolling interests



(228,059)




-


Net income



1,947,746




2,485,831


Adjustments to reconcile net income to net cash  provided by operating activities:









Depreciation and amortization



3,411,668




1,821,365


(Recovery of) Provision for doublful accounts



284,740




264,367


Stock-based compensation



148,038




160,897


Change in fair value of warrants



83




(116,180)


Change in assets and liabilities:









Accounts receivable



1,272,022




(598,060)


Other receivables



(1,196,797)




15,304


Employee advances



(88,962)




35,837


Inventories



124,084




(464,199)


Advances to suppliers



(2,961,113)




(673,722)


Prepaid expense and other current assets



3,195,216




(580,447)


Accounts payable and accrued liabilities



997,587




(97,201)


Unearned revenue



1,359,757




(569,659)


Accrued interest



(484,705)




(141,855)


Taxes payable



(588,625)




915,305


Net cash provided by operating activities



7,420,739




2,457,583











CASH FLOWS FROM INVESTING ACTIVITIES:









Payment for acquisition of property and equipment



(3,192,954)




(105,124)


Additions to construction in progress



(4,744,279)




(4,845,643)


Prepayment on long-term assets



4,962,691




(687,313)


Payment for acquisition of business



(657,421)




-


Payment for intangible assets



(1,506,029)




(71,138)


Net cash used in investing activities



(5,137,992)




(5,709,218)











CASH FLOWS FROM FINANCING ACTIVITIES:


















Proceeds from short-term debt and other payable, related parties



-




2,081,000


Repayment of long-term debt



(794,000)




-


Repayment of senior notes



(3,333,334)




-


Increase in restricted cash



(794,000)




-


Net cash (used in) provided by financing activities



£¨4,921,334£©




2,081,000











Effect of exchange rate changes on cash and cash equivalents



23,216




55,550











NET DECREASE IN CASH AND CASH EQUIVALENTS



(2,615,371)




(1,115,085)











CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD



9,622,883




10,046,249











CASH AND CASH EQUIVALENTS, END OF PERIOD


$

7,007,512



$

8,931,164











SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:









Interest paid, including capitalized interest


$

1,194,334



$

1,406,911


Income taxes paid


$

1,143,667



$

-











Non-cash transactions for investing and financing activities:









Construction materials transferred to Construction in progress


$

67,185



$

4,960,793


Construction in progress transferred to property and equipment


$

15,506,551



$

-


Advances to suppliers transferred to construction in progress


$

-



$

7,480,412


Capitalized interest - amortization of discount of notes payable and issuance cost


$

1,016,672



$

1,016,146


Other assets transferred to construction in progress


$

671,615



$

545,354


 

For more information, please contact:

China Natural Gas, Inc.    
Zhaoyang Qiao, CFO
Phone: +86-29-8832-7391
Email: qiaochaoyang@naturalgaschina.com

Jackie Shi
Investor Relations Director
Phone: +86-29-8832-3325 x922
Cell:  +86-139-9287-9998
Email: yjshi@naturalgaschina.com

 

SOURCE China Natural Gas, Inc.

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