Exhibit 99.1

 

For Immediate Release

 

Cleantech Solutions International Reports First Quarter 2015 Results

  

●

Revenues were $15.6 million with net income of $1.2 million, or $0.32 per basic and diluted share

 

Wuxi, Jiangsu Province, China – May 15, 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, and, since the first quarter of 2015, the petroleum and chemical industries, today announced its financial results for the three months ended March 31, 2015.

 

“In the first quarter of 2015, credit conditions in China adversely impacted the ability of some of our dyeing equipment customers to make timely payments. In order to reduce our business risk, we postponed shipments of low-emission airflow dyeing machines to certain customers who were behind in payments. In addition, we experienced softer demand for our low-emission airflow dyeing machines, as many of our customers upgraded to new models in 2014, and our forged rolled rings and related components. Despite the challenging economic conditions, we were profitable, generated positive cash flow and closed the quarter with $12.9 million in cash and equivalents,” said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. “This quarter also marked our entry into the petroleum and chemical equipment market, a business we hope will make a meaningful contribution to our revenue in 2015 as we work to fulfill the purchase orders received late last year and early this year.”

 

First Quarter 2015 Results

 

Revenue for the first quarter of 2015 decreased by 11.3% to $15.6 million, compared to $17.6 million for the same period of 2014.

 

The Company experienced lower sales of forged rolled rings and related components to customers in the wind power and other industries and to dyeing and finishing equipment customers compared to the comparable quarter last year. These decreases were partially offset by sales of equipment to customers in the petroleum and chemical industries.

 

	●	Revenue from the sale of forged rolled rings to the wind power and other industries fell by 11.9% to $7.3 million, compared with $8.3 million for the comparable period of the prior year. The Company previously broke down the information from this segment between wind power and other industries. Because the Company no longer believes that this distinction is material, it is providing information as to all forged rolled rings and related components without separating the two types of customers.
	●	Revenue from the dyeing and finishing equipment segment decreased by 30.4% to $6.5 million, compared to $9.4 million for the first quarter of 2014.
	●	The Company generated $1.8 million in revenues from sales of equipment to customers in the petroleum and chemical industries starting in the first quarter of 2015, and has classified sales of equipment to customers in these industries as one of its reportable business segments for 2015.

 

Gross profit for the first quarter of 2015 decreased by 28.1% to $3.1 million, compared to $4.3 million for the same period in 2014. Gross margin was 19.6% during the first quarter of 2015 compared to 24.2% for the same period a year ago. The decline in gross margin for the first quarter of 2015 was primarily attributable to (i) the reduced scale of operations resulting from lower revenues, including the allocation of fixed costs mainly consisting of depreciation, to cost of revenues in the forged products and components and dyeing and finishing equipment segments combined with a slight increase in labor costs, and (ii) the production of new styles of dyeing and finishing machines and (iii) the contribution of revenue from the sale of equipment to customers in the petroleum and chemical industries, which currently has a low gross margin because the Company is a new entrant to this market and is offering lower prices to attract customers. The Company hopes to improve gross margin from each of its business segments to the extent it is able to generate sufficient revenue to enable it to scale operations.

 

 

Operating expenses increased by 25.1% to $1.2 million, compared to $1.0 million in the comparable period last year. The increase was primarily due to higher depreciation expenses related to new office equipment, furniture and other improvements, and the inclusion of depreciation for certain manufacturing machinery that was temporarily idle in the first quarter of 2015, for which the related depreciation was categorized as an operating expense in the current quarter as contrasted with cost of revenues in the comparable period last year.

 

Selling, general and administrative expenses increased by 1.6% to $0.9 million, primarily due to higher stock-based compensation expenses, which were offset by reductions in shipping, travel and entertainment expenses, professional fees and other expenses.

 

Operating income was $1.8 million, compared to operating income of $3.3 million in the same period of 2014. Operating margin was 11.7% compared to 18.6% in the same period of 2014.

 

EBITDA, a non-GAAP measurement, which adds to net income interest expense, income tax, depreciation and amortization, was $3.9 million, compared to $5.3 million in the first quarter last year. The calculation of EBITDA is shown in a table following the financial statements.

 

Net income for the first quarter of 2015 was $1.2 million, or $0.32 per basic and diluted share, compared to net income of $2.4 million, or $0.68 per basic and diluted share, in the first quarter of 2014.

 

Financial Condition

 

As of March 31, 2015, Cleantech Solutions held cash and cash equivalents of $12.9 million compared to $7.8 million at December 31, 2014. Accounts receivable were $18.1 million compared to $20.3 million at December 31, 2014. Inventories were $5.2 million compared to $4.2 million at December 31, 2014. Total current assets were $37.8 million as of March 31, 2015. The Company had $3.0 million in short-term bank loans payable at March 31, 2015, relatively unchanged from December 31, 2014. Stockholders’ equity was $99.3 million at March 31, 2015. In the first quarter of 2015, the Company generated $5.0 million in cash flow from operations.

 

Business Outlook

 

“Despite the slow start to the year, we expect to generate revenue growth in 2015. We are excited by the opportunities in the petroleum and chemical industries, and are making good progress fulfilling the orders we have on hand,” said Mr. Wu. “We believe the Chinese government’s recent actions to loosen monetary policy, if it continues, will have a positive impact on credit conditions in the near term, and we expect to receive payment and ship the temporarily delayed low-emission airflow dyeing machines in the second and third quarters of 2015. We will showcase our new air-fluid, dual-use dyeing machine at the 17^th International Exhibition on Textile Industry in Shanghai, where we hope to generate strong interest from textile manufacturers seeking to comply with China’s more aggressive pollution control requirements.”

 

Conference Call

 

Cleantech Solutions will conduct a conference call at 9:00 a.m. Eastern Daylight Time on Monday, May 18, 2015 to discuss financial results for the first quarter ended March 31, 2015.

 

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 May 25, 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: 10065993.

 

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, and a supplier of products for the petroleum and chemical industries. 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 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended March 31, 2015. 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

 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

  

		For the Three Months Ended
		March 31,
		2015				2014
REVENUES		$	15,646,465			$	17,635,271
COST OF REVENUES			12,574,433				13,361,985
GROSS PROFIT			3,072,032				4,273,286
OPERATING EXPENSES:
Depreciation			344,696				109,859
Selling, general and administrative			874,545				860,599
Research and development			28,698				26,871
Total Operating Expenses			1,247,939				997,329
INCOME FROM OPERATIONS			1,824,093				3,275,957
OTHER INCOME (EXPENSE):
Interest income			5,833				5,240
Interest expense			(57,343	)			(57,727	)
Grant income			-				31,887
Foreign currency transaction loss			(11	)			-
Total Other Income (Expense), net			(51,521	)			(20,600	)
INCOME BEFORE INCOME TAXES			1,772,572				3,255,357
INCOME TAXES			530,138				858,999
NET INCOME		$	1,242,434			$	2,396,358
COMPREHENSIVE INCOME:
NET INCOME		$	1,242,434			$	2,396,358
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized foreign currency translation gain (loss)			472,980				(781,788	)
COMPREHENSIVE INCOME		$	1,715,414			$	1,614,570
NET INCOME PER COMMON SHARE:
Basic		$	0.32			$	0.68
Diluted		$	0.32			$	0.68
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			3,934,653				3,503,502
Diluted			3,934,653				3,503,502

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31, 2015				December 31, 2014
ASSETS		(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents		$	12,855,900			$	7,835,791
Restricted cash			409,226				488,719
Notes receivable			112,520				114,034
Accounts receivable, net of allowance for doubtful accounts			18,073,455				20,316,037
Inventories, net of reserve for obsolete inventories			5,204,565				4,241,022
Advances to suppliers			599,757				565,581
Deferred tax assets			377,552				375,744
Prepaid expenses and other			158,685				153,260
Total Current Assets			37,791,660				34,090,188
PROPERTY AND EQUIPMENT, net			67,884,885				69,628,597
OTHER ASSETS:
Equipment held for sale			424,573				422,540
Land use rights, net			3,665,902				3,672,420
Total Assets		$	109,767,020			$	107,813,745
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank loans		$	3,028,269			$	3,095,219
Bank acceptance notes payable			409,226				488,719
Accounts payable			5,220,009				4,322,275
Accrued expenses			546,021				1,059,579
Advances from customers			821,788				495,461
VAT and service taxes payable			259,729				500,569
Income taxes payable			171,361				531,120
Total Current Liabilities			10,456,403				10,492,942
Total Liabilities			10,456,403				10,492,942
STOCKHOLDERS' EQUITY:
Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and outstanding at March 31, 2015 and December 31, 2014)			-				-
Common stock ($0.001 par value; 50,000,000 shares authorized; 3,939,986 and 3,859,986 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively)			3,940				3,860
Additional paid-in capital			33,792,177				33,517,857
Retained earnings			51,145,303				50,039,267
Statutory reserve			3,430,597				3,294,199
Accumulated other comprehensive income - foreign currency translation adjustment			10,938,600				10,465,620
Total Stockholders' Equity			99,310,617				97,320,803
Total Liabilities and Stockholders' Equity		$	109,767,020			$	107,813,745

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Three Months Ended
		March 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	1,242,434			$	2,396,358
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation			2,074,507				1,965,274
Amortization of land use rights			24,086				24,165
Stock-based compensation			274,400				-
Changes in operating assets and liabilities:
Notes receivable			2,054				626,267
Accounts receivable, net of allowance for doubtful accounts			2,330,169				1,438,666
Inventories			(939,030	)			(1,423,313	)
Prepaid value-added taxes on purchases			-				369,574
Prepaid and other current assets			(4,835	)			(13,343	)
Advances to suppliers			(31,318	)			78,486
Accounts payable			873,118				(598,233	)
Accrued expenses			(515,767	)			(427,424	)
VAT and service taxes payable			(242,190	)			(52,228	)
Income taxes payable			(360,739	)			(294,175	)
Advances from customers			322,533				(321,360	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			5,049,422				3,768,714
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(4,755	)			(2,868,611	)
NET CASH USED IN INVESTING ACTIVITIES			(4,755	)			(2,868,611	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loans			2,200,202				981,098
Repayments of bank loans			(2,281,691	)			(981,098	)
Decrease in restricted cash			81,489				277,978
Decrease in bank acceptance notes payable			(81,489	)			(277,978	)
NET CASH USED IN FINANCING ACTIVITIES			(81,489	)			-
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS			56,931				(13,870	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			5,020,109				886,233
CASH AND CASH EQUIVALENTS - beginning of period			7,835,791				1,114,873
CASH AND CASH EQUIVALENTS - end of period		$	12,855,900			$	2,001,106
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest		$	57,343			$	57,727
Income taxes		$	890,876			$	1,153,173
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on credit as payable		$	-			$	267,324

 

 

Reconciliation of Net Income (Loss) to EBITDA

(Amounts expressed in US$)

 

		For the Three Months Ended December 31,
		2014				2013
Net income (loss)		$	1,242,434			$	2,396,358
Add: income tax			530,138				858,999
Add: interest expense			57,343				57,727
Add: depreciation and amortization			2,098,593				1,989,439
Adjusted EBITDA		$	3,928,508			$	5,302,523

 

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