Exhibit 99.1

 

For Immediate Release

 

Cleantech Solutions International Reports Fourth Quarter and Full Year 2014 Results, Provides 2015 Outlook

 

●     2014 Revenues rose 5% year-over-year to $76 million

●    2014 net income was $4.3 million or $1.15 per basic and diluted share

●    2014 Non-GAAP net income was $9.3 million, or $2.50 per basic and diluted share

●    2015 revenue expected in the range of $85 - $90 million

  

Wuxi, Jiangsu Province, China – March 31, 2015 – 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 year ended December 31, 2014.

 

“We recorded modest revenue growth in 2014, driven by our dyeing and finishing equipment business due to our marketing efforts and the effects of Chinese government’s policies that are encouraging textile manufacturers to upgrade equipment with more environmentally friendly models. Net income was impacted by a $3.8 million impairment loss related to equipment held for sale and a $1.2  million reduction of previously recorded deferred tax assets related to that equipment. We generated positive cash flow from operations and closed the year with $7.8 million in cash and equivalents. We introduced new styles of dyeing machines and upgraded our facilities to serve customers in the oil and gas and petrochemical industries, allowing us to obtain several purchase orders that will contribute to our revenue growth in 2015,” said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions.

 

Fourth Quarter 2014 Results

 

Revenue for the fourth quarter of 2014 decreased by 9.9% to $20.5 million, compared to $22.8 million for the same period of 2013.

 

The Company experienced lower sales of forged products to non-wind customers and dyeing and finishing equipment customers compared to the comparable quarter last year, when the Company generated  record sales  from these two segments:

 

●

Revenue from the dyeing and finishing equipment segment decreased by 9.0% to $11.4 million, compared to $12.5 million for the fourth quarter of 2013.

 

●

Revenue from the sale of forged rolled rings to industries other than wind power fell by 17.2% to $5.0 million, compared with $6.0 million for the comparable period of the prior year.

 

●

Revenue from the sale of forged rolled rings for the wind power industry fell by 2.2% to $4.2 million, compared to $4.3 million for the comparable period last year.

 

 

Gross profit for the fourth quarter of 2014 decreased by 20.6% to $4.7 million, compared to $5.9 million for the same period in 2013. Gross margin was 22.9% during the fourth quarter of 2014 compared to 26.0% for the same period a year ago. The decline in gross margin for the 2014 fourth quarter was primarily attributable to (i) lower selling prices in our forged products and components segment, which was necessary to meet competition, and (ii) the relatively higher costs of revenue associated with the introduction of new models of dyeing and finishing equipment with an initial low production run resulting is fixed costs being allocated over a smaller number of units.

 

Operating expenses increased by 84.2% to $5.8 million, compared to $3.1 million in the comparable period last year. The increase was primarily due to a $3.8 million non-cash impairment loss related to electro-slag re-melted (“ESR”) equipment in the fourth quarter of 2014, compared to a $2.6 million non-cash impairment loss on the same equipment in the same period last year. The Company does not expect any material impairment charges associated with the ESR equipment in the future. Selling, general and administrative expenses increased by 276.4%, primarily due to the recording of bad debt expense of $0.5 million in the fourth quarter of 2014, compared with a $0.7 bad debt recovery in the fourth quarter of 2013 resulting from the collection of a previously written-off receivable.

 

Operating loss was $1.1 million, compared to operating income of $2.8 million in the same period of 2013. Operating margin was negative 5.2% compared to 12.2% in the same period of 2013.

 

EBITDA, a non-GAAP measurement, which adds back to net income interest expense, income tax, depreciation and amortization, impairment loss on ESR equipment, and a reduction in deferred tax assets related to ESR equipment, was $5.0 million, compared to $7.3 million in the fourth quarter last year. The calculation of EBITDA is shown in a table following the financial statements.

 

Net loss for the fourth quarter of 2014 was $3.0 million, or $(0.79) per basic and diluted share, compared to net income of $2.1 million, or $0.60 per basic and diluted share, in the fourth quarter of 2013. Non-GAAP net income, which adds back to net income the impairment loss on ESR equipment and a reduction in previously recorded deferred tax assets related to the ESR equipment, was $2.0 million, or $0.51 per basic and diluted share, compared with $4.7 million, or $1.34 per basic and diluted share, in the fourth quarter of 2013. The calculations of non-GAAP net income and earnings per share are shown in a table following the financial statements.

 

 

Full Year Results

 

For the year ended December 31, 2014, revenue increased by 5.3% to $76.0 million from $72.1 million in 2013. Gross profit was $17.7 million unchanged from last year. Gross margin in 2014 was 23.4%, compared to 24.5% in 2013. Operating income decreased 21.8% to $8.9 million from $11.4 million in 2013. EBITDA, a non-GAAP measurement, was $21.4 million, compared to $20.9 million in 2013. Net income was $4.3 million, compared to $8.2 million in 2013. Net income per basic and diluted share was $1.15 compared to $2.55 in 2013. Non-GAAP net income was $9.3 million, compared to $10.8 million in 2013. Non-GAAP net income per basic and diluted share was $2.50 compared to $3.35 in 2013. The calculations of EBITDA and non-GAAP net income and earnings per share are shown in a table following the financial statements.

 

Financial Condition

 

As of December 31, 2014, Cleantech Solutions held cash and cash equivalents of $7.8 million compared to $1.1 million at December 31, 2013. Accounts receivable were $20.3 million compared to $15.2 million at December 31, 2013. Inventories were $4.2 million compared to $4.7 million at December 31, 2013. Total current assets were $34.1 million as of December 31, 2014. The Company had $3.1 million in short-term bank loans payable at December 31, 2014, relatively unchanged from December 31, 2013. Stockholders’ equity was $97.3 million at December 31, 2014.

 

In 2014, the Company generated $12.2 million in cash flow from operations and spent approximately $7.1 million in capital expenditures to expand production capabilities which included the acquisition of new machinery and molds to be used in the production process and the expansion of factory space, for the expansion and upgrade of employee dormitory facilities, and for improvements to existing office facilities.

 

Recent Events

 

In January 2015, Cleantech Solutions’ operating company, Wuxi Huayang Dyeing Machinery Co., Ltd. ("Huayang Dyeing"), a variable interest entity, received a purchase order worth RMB7.0 million ($1.1 million) for 12 units of its newly developed air-fluid, dual-use dyeing machine from a leading weaving and dyeing enterprise based in Shaoxing, China. The Company expects to begin delivering the equipment in May 2015.

 

Business Outlook

 

Based on current and anticipated orders, for the year ending December 31, 2015 the Company expects revenues in the range of $85 - $90 million representing 12% - 18% growth from 2014 revenue.

 

“We expect revenue growth to continue in 2015, driven primarily by sales of forged products and components to customers in the petroleum and chemical industries. We are pleased that after receiving the certifications needed to serve these markets in mid-2013, we now have several orders in hand that will generate meaningful revenue in 2015. We see room for additional growth as a number of our customers in the petroleum and chemical industry are benefiting from closer energy trade relations between Russia and China ,” said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. “We also expect a significant revenue contribution from our dyeing equipment segment as textile manufactures continue to upgrade equipment in an effort to comply with China’s more aggressive pollution control requirements. We are hopeful our new air-fluid, dual-use dyeing machine will be well received at the upcoming Shanghai International Textile Industry Expo in June.”

 

 

Conference Call

 

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Daylight Time on Tuesday, March 31, 2015 to discuss financial results for the fourth quarter and year ended December 31, 2014.

 

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 346-8982. International callers should dial (412) 902-4272 and ask to join the Cleantech Solutions International call.

 

If you are unable to participate in the conference call at this time, a replay will be available through April 7, 2015 at 9:00 am EDT. To access the replay, dial (877) 344-7529 or (412) 317-0088 for international callers and enter pin code: 10062749.

 

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 and dyeing and finishing equipment for the textile industry and forged rolled rings and related products, and a supplier of fabricated products and machining services to a range of clean technology customers. 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, 2014. 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

+1-310-528-3031

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,
		2014				2013				2014				2013
REVENUES		$	20,548,832			$	22,800,321			$	75,958,676			$	72,112,662
COST OF REVENUES			15,841,731				16,873,793				58,217,667				54,446,324
GROSS PROFIT			4,707,101				5,926,528				17,741,009				17,666,338
OPERATING EXPENSES:
Depreciation			344,809				111,551				721,449				573,090
Impairment loss			3,799,947				2,573,256				3,799,947				2,573,256
Selling, general and administrative			1,603,198				425,959				4,193,643				3,034,189
Research and development			28,614				25,957				116,061				92,803
Total Operating Expenses			5,776,568				3,136,723				8,831,100				6,273,338
INCOME (LOSS) FROM OPERATIONS			(1,069,467	)			2,789,805				8,909,909				11,393,000
OTHER INCOME (EXPENSE):
Interest income			4,841				6,278				18,127				22,287
Interest expense			(59,913	)			(56,090	)			(238,226	)			(300,381	)
Grant income			14				-				34,835				-
Foreign currency transaction gain			(5	)			43,486				1,263				27,686
Rental income, net			33,874				-				101,539				-
Other income			-				(235	)			-				42,780
Total Other Income (Expense), net			(21,189	)			(6,561	)			(82,462	)			(207,628	)
INCOME (LOSS) BEFORE INCOME TAXES			(1,090,656	)			2,783,244				8,827,447				11,185,372
INCOME TAXES			1,956,930				673,556				4,561,030				2,999,795
NET INCOME (LOSS)		$	(3,047,586	)		$	2,109,688			$	4,266,417			$	8,185,577
COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS)		$	(3,047,586	)		$	2,109,688			$	4,266,417			$	8,185,577
OTHER COMPREHENSIVE (LOSS) INCOME:
Unrealized foreign currency translation gain (loss)			237,441				590,131				(408,386	)			2,751,842
COMPREHENSIVE INCOME (LOSS)		$	(2,810,145	)		$	2,699,819			$	3,858,031			$	10,937,419
NET INCOME (LOSS) PER COMMON SHARE:
Basic		$	(0.79	)		$	0.60			$	1.15			$	2.55
Diluted		$	(0.79	)		$	0.60			$	1.15			$	2.55
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			3,859,986				3,503,502				3,715,300				3,210,791
Diluted			3,859,986				3,503,502				3,715,300				3,210,791

 

See notes to consolidated financial statements

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		December 31,
		2014				2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	7,835,791			$	1,114,873
Restricted cash			488,719				687,353
Notes receivable			114,034				703,718
Accounts receivable, net of allowance for doubtful accounts			20,316,037				15,234,863
Inventories, net of reserve for obsolete inventories			4,241,022				4,733,558
Advances to suppliers			565,581				695,254
Prepaid VAT on purchases			-				489,302
Deferred tax assets - current portion			375,744				253,173
Prepaid expenses and other			153,260				74,030
Total Current Assets			34,090,188				23,986,124
PROPERTY AND EQUIPMENT, net			69,628,597				70,595,138
OTHER ASSETS:
Deferred tax assets - net of current portion			-				1,222,216
Equipment held for sale/operating lease			422,540				4,751,206
Land use rights, net			3,672,420				3,786,051
Total Assets		$	107,813,745			$	104,340,735
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank loans		$	3,095,219			$	3,109,453
Bank acceptance notes payable			488,719				687,353
Accounts payable			4,322,275				4,961,555
Accrued expenses			1,059,579				899,816
Advances from customers			495,461				1,455,740
VAT and service taxes payable			500,569				126,349
Income taxes payable			531,120				1,623,603
Total Current Liabilities			10,492,942				12,863,869
Total Liabilities			10,492,942				12,863,869
STOCKHOLDERS' EQUITY:
Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and outstanding at December 31, 2014 and 2013)			-				-
Common stock ($0.001 par value; 50,000,000 shares authorized; 3,859,986 and 3,503,502 shares issued and outstanding at December 31, 2014 and 2013, respectively)			3,860				3,503
Additional paid-in capital			33,517,857				31,532,308
Retained earnings			50,039,267				46,322,329
Statutory reserve			3,294,199				2,744,720
Accumulated other comprehensive income - foreign currency translation adjustment			10,465,620				10,874,006
Total Stockholders' Equity			97,320,803				91,476,866
Total Liabilities and Stockholders' Equity		$	107,813,745			$	104,340,735

 

See notes to consolidated financial statements

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Years Ended
		December 31,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	4,266,417			$	8,185,577
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation			8,469,771				6,704,386
Amortization of land use rights			96,226				95,491
Increase in inventory reserve			-				41,381
Increase (decrease) in allowance for doubtful accounts			521,928				(628,188	)
Increase in allowance for deferred tax assets			2,165,677				-
Loss on impairment of equipment held for sale/operating lease			3,799,947				2,573,256
Loss on disposal of fixed assets			-				11,391
Stock-based compensation			375,989				423,112
Changes in operating assets and liabilities:
Notes receivable			586,014				(604,798	)
Accounts receivable			(5,668,901	)			(4,126,440	)
Inventories			470,509				1,303,519
Prepaid value-added taxes on purchases			486,689				70,059
Prepaid and other current assets			(94,718	)			91,666
Advances to suppliers			126,394				(81,120	)
Deferred tax assets			(1,080,469	)			-
Accounts payable			(872,178	)			(1,809,914	)
Accrued expenses			164,465				(112,797	)
VAT and service taxes payable			374,512				(86,004	)
Income taxes payable			(1,077,373	)			(129,378	)
Advances from customers			(952,885	)			(452,658	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			12,158,014				11,468,541
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(11,058,530	)			(14,633,745	)
Refund of previously purchased property and equipment			3,991,405				-
NET CASH USED IN INVESTING ACTIVITIES			(7,067,125	)			(14,633,745	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease			-				(391,963	)
Proceeds from bank loans			3,906,759				5,653,824
Repayments of bank loans			(3,906,759	)			(4,846,135	)
Decrease (increase) in restricted cash			195,338				(678,459	)
(Decrease) increase in bank acceptance notes payable			(195,338	)			678,459
Net proceeds from sale of common stock			1,623,691				2,388,589
NET CASH PROVIDED BY FINANCING ACTIVITIES			1,623,691				2,804,315
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS			6,338				30,034
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			6,720,918				(330,855	)
CASH AND CASH EQUIVALENTS - beginning of year			1,114,873				1,445,728
CASH AND CASH EQUIVALENTS - end of year		$	7,835,791			$	1,114,873
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest		$	238,226			$	300,381
Income taxes		$	4,553,195			$	3,129,174
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on credit as payable		$	256,082			$	1,121,719

 

See notes to consolidated financial statements

 

 

Reconciliation of Net Income (Loss) to EBITDA

(Amounts expressed in US$)

 

		For the Three Months Ended December 31,								For the Years Ended December 31,
		2014				2013				2014				2013
Net income (loss)		$	(3,047,586	)			2,109,688				4,266,417				8,185,577
Add: income tax			1,956,930				673,556				4,561,030				2,999,795
Add: interest expense			59,913				56,090				238,226				300,381
Add: impairment loss for ESR equipment			3,799,947				2,573,256				3,799,947				2,573,256
Add: depreciation and amortization			2,248,133				1,845,717				8,565,997				6,799,877
Adjusted EBITDA		$	5,017,337				7,258,307				21,431,617				20,858,886

 

Reconciliation of Non GAAP Operating Income,

Net Income and EPS

(Amounts expressed in US$)

 

		For the Three Months Ended December 31,								For the Years Ended December 31,
		2014				2013				2014				2013
Net income (loss)		$	(3,047,586	)		$	2,109,688			$	4,266,417			$	8,185,577
Add: impairment loss for ESR equipment		$	3,799,947			$	2,573,256			$	3,799,947			$	2,573,256
Add: reduction in deferred tax asset for ESR equipment			1,215,690				-				1,215,690				-
Adjusted net income		$	1,968,051			$	4,682,944			$	9,282,054			$	10,758,833
Weighted average shares - diluted			3,859,986				3,503,502				3,715,300				3,210,791
Adjusted diluted EPS		$	0.51			$	1.34			$	2.50			$	3.35

  

 

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