China Energy Savings Technology Announces Third Quarter Results
23 Août 2005 - 4:20PM
PR Newswire (US)
Company Reflects the Acquisition of the Remaining 35% Interest in
Starway Management Limited Subsidiary HONG KONG, Aug. 23
/Xinhua-PRNewswire/ -- China Energy Savings Technology, Inc.
(NASDAQ:CESV), a leading provider of energy management products in
China, announced today results for its third fiscal quarter for the
period ended June 30, 2005. The Company had revenue of $9.6 million
compared to revenue of $13.7 million for the fiscal 2004 third
quarter. China Energy Savings had net income of $4.5 million, or
$0.18 per diluted share, compared to net income of $4.04 million,
or $0.23 per diluted share in the fiscal 2004 third quarter. The
fiscal 2005 third quarter results include a one-time non- cash
reduction in revenue of $2.1 million that was caused by the Company
taking a conservative approach to discount its notes receivable
from customers. Results were also impacted by the Company's
decision to pursue energy-saving sharing agreements with its
customers, which provide the Company recurring revenue over a five
to seven year time period, but there is an immediate decrease in
the up-front revenue, gross profit and net income, compared to
outright equipment sales. The results include the acquisition of
the 35% interest in Starway Management Limited ("Starway") that the
Company did not previously own. For the nine months ended June 30,
2005, the Company had revenue of $32.5 million compared to $34.1
million during the same nine months in fiscal 2004. China Energy
Savings generated net income of $12.8 million for the first nine
months of fiscal 2005, or $0.62 per diluted share, compared to net
income of $8.2 million, or $0.46 per diluted share in the
comparable year-earlier period. Revenue for the nine-month period
declined when compared to the same period in fiscal 2004, while net
income increased as 2004 revenue was generated solely from
equipment sales, while current fiscal year's revenue was derived
primarily from energy-saving sharing agreements. As of June 30,
2005, the Company had its strongest balance sheet ever, with cash
and cash equivalents of $24.6 million, compared to $18.4 million at
the end of its fiscal year on September 30, 2005. On July 12, 2005,
the Company issued a press release where it announced preliminary
results for its operating subsidiary Starway for the quarter ended
June 30, 2005, where it expected to report quarterly revenue of
approximately $12.17 million and net income of approximately $7.35
million, resulting in fiscal third quarter earnings per diluted
share of $0.30. Subsequently, while China Energy Savings Technology
was consolidating its financial statements with its subsidiaries,
it elected to make a one-time adjustment for revenue to be
recognized under its energy-saving sharing agreements, discounting
certain future notes receivables. As a result, the Company will
recognize the revenue under GAAP over a longer period of time. The
Company has notes receivable generated through energy-saving
contracts of $6.6 million in 2006, $6 million in 2007, $4.5 million
in 2008, $4 million in 2009 and $2.8 million in 2010. On February
1, 2005, the Company acquired the 35% interest in Starway that it
did not previously own from Sky Beyond Investments Limited by
issuing a total of 7,807,569 shares of common stock. Sky Beyond had
acquired the 35% interest in Starway from the Hong Kong-listed
company Golden Resorts Group Limited. However, the Company
subsequently learned that the stock sale between Sky Beyond and
Golden Resorts Group Limited was subject to approval by the
shareholders of Golden Resorts. On July 28, 2005, the shareholders
of Golden Resorts approved the sale of the Starway interest to Sky
Beyond. The second quarter financial statements of the Company did
not record the additional earnings and additional paid in capital
attributed to the acquisition until the transaction was approved.
Since the transaction has been approved, the Company has reflected
the earnings and additional paid in capital from February 1, 2005
in the financial statements of June 30, 2005 and will amend its
quarterly results for March 31, 2005 to reflect the increased
earnings as a result of the acquisition being completed. Since the
acquisition by China Energy Savings of the 35% interest in Starway
has been confirmed with an effective date of February 1, 2005, the
Company held a 100% interest in Starway, effective as of that date.
On a pro forma basis, assuming the acquisition as of that date, the
Company would have had pro forma revenue of $32.5 million,
resulting in net income of $16.2 million, or $0.66 per diluted
share for the first nine months of its fiscal year. The Company
plans to restate its March, 2005 and June, 2005 quarterly results
to effect the consummation of the transaction. "With the acute
power shortage and the strong endorsement of the government of
energy savings, we continue to see unprecedented demand for our
energy saving products," said Sun Li, Chairman and CEO of China
Energy Savings Technology. "We are now in our strongest quarter of
the year in which most of the revenue will come from energy-sharing
agreements, as energy use in China soars during the summer months.
With electricity costs rising significantly, large corporate
customers and municipalities are increasingly turning to us for our
energy management solutions. Our decision to focus principally on
energy-sharing agreements instead of outright equipment sales,
while impacting our earnings in the near-term, will generate a
highly predictable recurring revenue stream which will result in
increased long-term profitability." China Energy Savings believes
pro forma non-GAAP reporting, giving effect to the adjustments for
the acquisition of Starway at the beginning of it is fiscal year,
provides meaningful information and therefore uses it to supplement
its GAAP reporting. China Energy Savings has chosen to provide this
supplemental information to investors, analysts and other
interested parties to enable them to perform additional analyses of
operating results and to illustrate the results of operations
giving effect to such pro forma non-GAAP adjustments. The pro forma
non-GAAP financial information presented herein should be
considered supplemental to, and not as a substitute for, or
superior to, financial measures calculated in accordance with GAAP.
About China Energy Savings Technology China Energy Savings
Technology, Inc., through its ownership interest in Starway
Management Limited engages in the development, manufacture, sale,
and distribution of energy-saving products for use in commercial
and industrial settings in the People's Republic of China.
According to test reports by various PRC authorities including the
National Center of Supervision & Inspection on Electric Light
Source Quality (Shanghai) issued in September 2002, Shenzhen
Academy of Metrology & Quality Inspection issued in December
2002 and approved by the State Quality Supervision Inspection
Department, the energy saving products of Starway's subsidiaries
may provide energy saving rates ranging from approximately 25% to
45%. The energy saving projects conducted by Starway's subsidiaries
mostly relate to public or street lighting systems, government
administration units, shopping malls, supermarkets, restaurants,
factories and oil fields, etc. There are small and large-scaled
projects: the small-scaled projects relate to restaurants, shops,
small arcades, offices and households through the sale of
equipment, and the large- scaled projects relate to large shopping
malls, supermarkets, factories and public bodies through the
provision and installation of equipment over a term usually
extended for years. Safe Harbor Statement As a cautionary note to
investors, certain matters discussed in this press release may be
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such matters involve
risks and uncertainties that may cause actual results to differ
materially, including the following: changes in economic
conditions; general competitive factors; the Company's ability to
execute its business model and strategic plans; and the risks
described from time to time in the Company's SEC filings. For more
information, please contact: John Roskelley President First Global
Media Tel: +1-480-902-3110 Web: http://www.cesv-inc.com/ Email: Ed
Lewis CEOcast, Inc. Tel: +1-212-732-4300 DATASOURCE: China Energy
Savings Technology, Inc. CONTACT: John Roskelley, President, First
Global Media, +1-480-902-3110, , or Ed Lewis of CEOcast, Inc.,
+1-212-732-4300 Web site: http://www.cesv-inc.com/
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