UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 15, 2015
CLEANTECH SOLUTIONS INTERNATIONAL, INC.
(Exact name of registrant as specified in Charter)
Nevada | 001-34591 | 90-0648920 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File No.) | (IRS Employee Identification No.) |
No. 9 Yanyu Middle Road
Qianzhou Village, Huishan District, Wuxi City
Jiangsu Province, People’s Republic of China
(Address of Principal Executive Offices)
(86) 51083397559
(Registrant’s Telephone number)
Copies to:
Asher S. Levitsky PC
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas; Suite 1100
New York, New York 10105
Phone: (212) 370-1300
Fax: (646) 895-7182
E-mail: alevitsky@egsllp.com
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On May 18, 2015, the Company issued a press release announcing its financial results for the quarter ended March 31, 2015. A copy of the Company’s May 18, 2015 press release is included as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure.
On May 15, 2015, the Company issued a press release announcing a conference call on May 18, 2015 to discuss financial results for the quarter ended March 31, 2015. A copy of the press release is included as Exhibit 99.2.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 | Press release issued on May 18, 2015 relating to its financial results for the quarter ended March 31, 2015. | |
99.2 | Press release issued on May 15, 2015 relating to the conference call. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 18, 2015 | Cleantech Solutions International, Inc. | |
By: | /s/ Adam Wasserman | |
Adam Wasserman | ||
Chief Financial Officer |
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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 17th 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.
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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-
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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 |
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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 |
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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 |
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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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Exhibit 99.2
For Immediate Release
Cleantech Solutions International Announces Conference Call to Discuss First Quarter 2015 Financial Results
WUXI, Jiangsu, China, May 14, 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 that it will conduct a conference call at 9:00 a.m. Eastern Time on Monday, May 18, 2015 to discuss financial results for the first quarter ended March 31, 2015.
Mr. Ryan Hua, Vice President of Operations, and Mr. Adam Wasserman, Chief Financial Officer, will host the conference call. The Company will release its financial results for the quarter and year ended March 31, 2015 prior to the call.
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.
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 forging 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. 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 Contact:
Cleantech Solutions International, Inc.
Adam Wasserman, CFO
E-mail: adamw@cleantechsolutionsinternational.com
Web: www.cleantechsolutionsinternational.com
Elaine Ketchmere, CFA
Compass Investor Relations
Phone: +1-310-528-3031
E-mail: eketchmere@compass-ir.com
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