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XI'AN, China, Nov. 9, 2012 /PRNewswire/ -- 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 third quarter ended September 30, 2012.
Shuwen Kang, CEO of China Natural Gas, Inc. commented: "We are pleased to share the results of our third quarter. The company has successfully commenced commercial production of its Jingbian liquefied natural gas ("LNG") plant on July 16, 2011, which represents a key milestone in its corporate history.
Our network of compressed natural gas, or CNG, fueling stations currently contains 32 stations, a significant presence in the markets we operate in. Our outlook for the forthcoming quarter of the year is promising as we continue to grow our business, and we look forward to sharing any future developments as they materialize."
Third Quarter 2012 Financial and Operating Results
Revenues in the third quarter of 2012 decreased by 15.8% to $31.06 million from $36.90 million in the third quarter of 2011,the decrease was primarily attributable to the sales volume decrease.Natural gas sales decreased 13.4% year-over-year to $27.90 million, compared to $32.23 million in the third quarter of 2011. Gasoline revenues in the third quarter of 2012 decreased to $0.65 million, down by 57.1% from $1.51 million in the same period of the prior year, which was mainly attributable to the closure of two gasoline fueling stations during the fourth quarter of 2011. Installation and services revenue decreased by 20.6% year-over-year to $2.51 million, compared to $3.16 million in the comparable period of 2011. In the third quarter of 2012, sales of natural gas, gasoline, and installation and other services contributed 89.8%, 2.1%, and 8.1% of the total revenues, respectively.
Gross profit in the third quarter of 2012 decreased 26.1% to $10.48 million, compared to $14.18 million in the same period of the prior year. Gross margin in the third quarter of 2012 was 33.7%, compared to 38.4% 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 third quarter of 2012 was $2.72 million, a decrease of 61.1% year-over-year from $7.00 million in the third quarter of 2011, primarily attributable to the decrease in gross profit of natural gas and increase in selling expenses.
Income tax expense was $0.09 million, as compared to $1.53 million in the third quarter of 2011.
Net loss in the third quarter of 2012 was $1.50 million, or $0.07 per diluted share, compared to net income of $4.55 million, or $0.21 per diluted share, in the third quarter of 2011, primarily attributable to the increase in non-operating expense related to the loss of $4.02 million on disposal of five fueling stations during the third quarter of 2012.
As of September 30, 2012, the Company had $8.60 million in cash and cash equivalents, compared to $9.62 million in cash and cash equivalents at 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 SPDB and of the principal of the Abax Senior Notes.
Net cash provided by operating activities was $21.08 million for the nine months ended September 30, 2012, compared to net cash provided by operations of $15.75 million for the nine months ended September 30, 2011. The increase was primarily due to the decrease in prepaid expense and other current assets, increase in unearned revenue and decrease in accounts receivable.
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, Henan and Hubei Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 21 CNG fueling stations in Shaanxi Province 10 CNG fueling stations in Henan Province and 1 CNG fueling station in Hubei Province. China Natural Gas' five primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; (2) the installation, distribution and sale of piped natural gas to residential, commercial and industrial customers through Company-owned pipelines; (3) production and sales of LNG through our LNG production facility in Jingbian County, Shaanxi Province; (4) the distribution and sale of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division.
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.
Consolidated Balance Sheets
As of September 30, 2012 and December 31, 2011
(Stated in US Dollars)
September 30,
December 31,
2012
2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
8,604,906
$
9,622,883
Restricted cash
739,150
-
Accounts receivable, net
2,064,413
2,997,845
Other receivables, net
93,453
540,646
Employee advances
812,524
285,270
Inventories
3,685,266
1,938,754
Advances to suppliers
6,467,436
4,540,139
Prepaid expense and other current assets
4,367,024
4,470,687
Total current assets
26,834,172
24,396,224
Investment in unconsolidated joint ventures
1,583,000
1,574,000
Property and equipment, net
179,374,098
174,097,754
Construction in progress
51,567,976
45,882,320
Deferred financing cost, net
-
517,334
Goodwill
1,741,678
629,729
Other intangible assets
20,366,045
18,910,244
Prepaid expenses and other assets
6,415,166
10,976,203
TOTAL ASSETS
$
287,882,135
$
276,983,808
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Senior notes- current maturities
$
38,255,832
$
9,671,682
Current portion of bank loan payable
5,540,500
4,722,000
Redeemable liabilities - warrants
17,500,000
-
Accounts payable and accrued liabilities
8,203,277
7,694,423
Other payable - related party
1,612,355
787,000
Short-term borrowing - related party
2,679,945
1,359,945
Unearned revenue
5,479,768
4,280,594
Accrued interest
1,470,269
1,029,431
Taxes payable
1,210,929
2,626,271
Total current liabilities
81,952,875
32,171,346
LONG-TERM LIABILITIES:
Senior notes, net of current portion
-
25,791,151
Bank loan payable, net of current portion
7,915,000
9,444,000
Borrowings - related party
-
1,320,000
Warrants liability
-
17,500,000
Total long-term liabilities
7,915,000
54,055,151
Total liabilities
$
89,867,875
$
86,226,497
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 issued and outstanding at September 30, 2012 and December 31, 2011
2,145
2,145
Additional paid-in capital
83,353,599
82,909,485
Accumulated other comprehensive income
20,713,885
19,817,493
Statutory reserves
11,051,811
10,124,710
Retained earnings
82,674,291
77,903,478
Noncontrolling interests
218,529
-
Total stockholders' equity
198,014,260
190,757,311
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
287,882,135
$
276,983,808
China Natural Gas, Inc.
Consolidated Statements of Income and Comprehensive Income
For the three months and nine months periods ended September 30, 2012 and 2011
(Stated in US Dollars)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2012
2011
2012
2011
Revenues
Natural gas
$
27,903,522
$
32,225,481
$
92,231,013
$
74,859,041
Gasoline
647,061
1,508,657
2,174,124
4,790,207
Installation and others
2,511,199
3,163,237
6,835,658
8,669,404
31,061,782
36,897,375
101,240,795
88,318,652
Cost of revenues
Natural gas
18,950,048
19,893,643
60,687,423
44,863,543
Gasoline
616,290
1,461,302
2,060,048
4,588,735
Installation and others
1,013,647
1,363,506
2,821,175
3,736,054
20,579,985
22,718,451
65,568,646
53,188,332
Gross profit
10,481,797
14,178,924
35,672,149
35,130,320
Operating expenses
Selling
6,503,728
4,667,132
17,074,392
12,288,465
General and administrative
1,255,336
2,513,296
5,603,011
7,276,052
7,759,064
7,180,428
22,677,403
19,564,517
Income from operations
2,722,733
6,998,496
12,994,746
15,565,803
Other income (expense):
Interest income
22,084
12,403
42,683
28,323
Interest expense
(277,347)
(465,236)
(985,027)
(469,902)
Loss on disposal of fixed assets
(4,017,726)
-
(4,017,726)
-
Other income (expense), net
133,625
(62,059)
119,295
25,806
Change in fair value of warrants
1,233
11,971
4
251,781
Foreign currency exchange loss
2,634
(421,031)
(501,812)
(428,079)
(4,135,497)
(923,952)
(5,342,583)
(592,071)
Income before income tax
(1,412,764)
6,074,544
7,652,163
14,973,732
Provision for income tax
87,239
1,529,451
2,129,838
3,549,122
Net income (loss)
(1,500,003)
4,545,093
5,522,325
11,424,610
Less: Income (loss) attributable to noncontrolling interests
23,594
-
(175,589)
-
Net income (loss) attributable to China Natural Gas, Inc.
(1,523,597)
4,545,093
5,697,914
11,424,610
Other comprehensive income (loss)
Foreign currency translation gain
(844,824)
2,696,721
896,392
7,139,013
Comprehensive income (loss)
$
(2,368,421)
$
7,241,814
$
6,594,306
$
18,563,623
Weighted average shares outstanding
Basic
21,458,654
21,458,654
21,458,654
21,403,052
Diluted
21,458,654
21,458,654
21,458,654
21,403,052
Earnings per share
Basic
$
(0.07)
$
0.21
$
0.27
$
0.53
Diluted
$
(0.07)
$
0.21
$
0.27
$
0.53
China Natural gas, Inc.
Consolidated Statements of Stockholders' Equity
As of September 30, 2012 and December 31, 2011
(Stated in US Dollars)
Common Stock
Additional
Accumulative Other
Retained Earnings
Total
Shares
Amount
Paid-in Capital
Comprehensive Income
Minority Interest
Statutory Reserve
Unrestricted
Stockholders' Equity
Balance at 1/1/2011
21,321,904
$
2,132
$
81,611,763
$
15,667,145
$
-
$
7,918,634
$
64,847,622
$
170,047,296
Exercise of stock options
136,750
13
670,062
-
-
-
-
670,075
Stock based compensation
-
-
627,660
-
-
-
-
627,660
Cumulative translation adjustment
-
-
-
4,150,348
-
-
-
4,150,348
Net income
-
-
-
-
-
-
15,261,932
15,261,932
Appropriation of retain earnings
-
-
-
-
-
2,206,076
(2,206,076)
-
Balance at 12/31/2011
21,458,654
$
2,145
$
82,909,485
$
19,817,493
$
-
$
10,124,710
$
77,903,478
$
190,757,311
Balance at 1/1/2012
21,458,654
$
2,145
$
82,909,485
$
19,817,493
$
-
$
10,124,710
$
77,903,478
$
190,757,311
Stock based compensation
-
-
444,114
-
-
-
-
444,114
Purchases of a Noncontrolling interest equity
-
-
-
-
394,118
-
-
394,118
Cumulative translation adjustment
-
-
-
896,392
-
-
-
896,392
Net income
-
-
-
-
(175,589)
-
5,697,914
5,522,325
Appropriation of retain earnings
-
-
-
-
-
927,101
(927,101)
-
Balance at 9/30/2012
21,458,654
$
2,145
$
83,353,599
$
20,713,885
$
218,529
$
11,051,811
$
82,674,291
$
198,014,260
China Natural gas, Inc.
Consolidated Statements of Cash Flows
For the nine months periods ended September 30, 2012 and 2011
(Stated in US Dollars)
For the Nine Months Ended September 30,
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to China Natural Gas, Inc.
$
5,697,914
$
11,424,610
Add: Loss attributable to noncontrolling interests
(175,589)
-
Net income
5,522,325
11,424,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
10,443,635
6,271,846
Provision for doubtful accounts
200,984
6,759
Loss (Gain) on disposal of fixed assets
4,017,726
(3,366)
Stock-based compensation
444,114
479,622
Change in fair value of warrants
(4)
(251,781)
Change in assets and liabilities:
Accounts receivable
1,067,790
(148,404)
Other receivables
170,241
(339,992)
Employee advances
(526,366)
24,019
Inventories
(1,365,120)
(1,011,663)
Advances to suppliers
(2,458,489)
(5,863,429)
Prepaid expense and other current assets
3,049,626
(313,404)
Accounts payable and accrued liabilities
325,648
1,953,199
Unearned revenue
1,176,182
3,171,096
Accrued interest
440,838
(114,033)
Taxes payable
(1,432,165)
461,903
Net cash provided by operating activities
21,076,965
15,746,982
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of property and equipment
(4,129,677)
(6,568,845)
Proceeds from sales of property and equipment
2,850,914
16,896
Additions to construction in progress
(13,107,944)
(7,884,773)
Prepayment on long-term assets
(418,295)
(805,522)
Payment for acquisition of business
(656,179)
-
Payment for intangible assets
(1,768,049)
(189,327)
Net cash used in investing activities
(17,229,230)
(15,431,571)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options
-
670,075
Proceeds from short-term debt and other payable, related parties
-
3,090,647
Repayment of long-term debt
(792,500)
-
Repayment of senior notes
(3,333,334)
(3,333,334)
Increase in restricted cash
(740,084)
-
Net cash (used in) provided by financing activities
(4,865,918)
427,388
Effect of exchange rate changes on cash and cash equivalents
206
424,188
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(1,017,977)
1,166,987
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
9,622,883
10,046,249
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
8,604,906
$
11,213,236
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized interest
$
718,541
$
293,941
Income taxes paid
$
3,330,382
$
3,142,069
Non-cash transactions for investing and financing activities:
Construction materials transferred to construction in progress
$
67,058
$
6,210,629
Construction in progress transferred to property and equipment
$
19,380,905
$
93,297,528
Construction in progress transferred to intangible assets
$
-
$
11,611,672
Advances to suppliers transferred to construction in progress
$
-
$
7,609,906
Other assets transferred to construction in progress
$
2,577,107
$
2,342,356
Capitalized interest - amortization of discount of notes payable and issuance cost
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