China Recycling Energy announced its financial results for the fourth quarter and full year ended December 31, 2014. Q4 interest income on sales-type leases increased 24.9% to $6.98 million from $5.59 million for the fourth quarter of 2013.
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Total sales were $0.12 million, compared with $13.20 million for the fourth quarter of 2013 as no power generation system was completed and sold in the fourth quarter of 2014.
Net income was $5.33 million, up 26.8% from $4.20 million for the fourth quarter of 2013. Basic and fully diluted earnings per share (EPS) was $0.06, as compared with $0.07 for the fourth quarter of 2013. Full Year 2014 Audited Financial Highlights
Interest income on sales-type leases increased 36.8% to $26.46 million from $19.34 million in 2013.
Total sales were $19.66 million, compared with $63.19 million in 2013. Net income was $19.81 million, up 26.8% from $15.63 million in 2013. Basic and fully diluted earnings per share (EPS) was $0.28, as compared with $0.29 in 2013.
Full year 2014 audited financial results
Total sales, including sales of systems and contingent rental income, were $19.66 million for the full year of 2014, a decrease of $43.53 million as compared with $63.19 million in 2013, mainly due to fewer systems completed and sold in 2014.
Sales of systems for the full year of 2014 were $18.87, as compared with $62.01 million in 2013. In 2014, the Yida system was completed and sold, while the Shenqiu Phase II system, the Shanxi Datong Phase I system, the Pucheng Biomass Phase II system and the Jitie system were completed and sold in 2013.
For the full year of 2014, the company received contingent rental income of $0.79 million from the usage of electricity in addition to the minimum lease payments, compared to $1.18 million in 2013.
For sales-type leases, sales and cost of sales are recorded at the time of the lease commencement; in addition to systems sales revenue, CREG's other major source of revenues is interest income from sales-type leases.
Cost of sales for the full year of 2014 was $14.59 million, as compared with $47.85 million in 2013. The decrease was mainly due to fewer systems completed and sold in 2014.
Gross profit was $5.07 million for the full year of 2014, as compared with $15.35 million in 2013. Blended gross margin for the full year of 2014 was 26%, compared with 24% in 2013.
Interest income on sales-type leases, which is a major and consistent regular revenue for the company, was $26.46 million for the full year of 2014, an increase of 36.8% from $19.34 million in 2013. In 2014, interest income was derived from sixteen sales-type leases.
Operating expenses totaled $3.49 million for the full year of 2014, a decrease of 16.0% as compared with $4.16 million in 2013, mainly due to a $0.59 million decrease in consulting expenses compared to 2013.
Non-operating expenses consisted of non-sales-type lease interest income, interest expenses, bank charges and miscellaneous expenses. For the full year of 2014, net non-operating expenses were $2.20 million, compared with $7.83 million in 2013.
For the full year of 2014, the company had $3.43 million in interest expense on loans, and $1.02 million in other income consisting mainly of $0.93 million in income from the sale of a TRT system to Zhangzhi and $1.76 million in income from the sale of a WHPG system to Zhong Gang, but offset by $1.58 million in financial expenses. In addition, the company had $0.19 million in interest income in 2014.
For the full year of 2013, the company had $6.72 million in interest expense on loans, a $1.29 million one-time commission to the fund management company for initiating and completing a RMB460 million ($75.0 million) financing for the company, and $0.23 million in interest income.
Income tax expense was $6.11 million for the full year of 2014, decreased by 11.3% as compared with $6.89 million in 2013. The decrease in income tax expense was mainly due to a decrease in the consolidated effective income tax rate, which was 23.7% in 2014, compared with 30.3% in 2013.
This is mainly due to the 15% preferential income tax rate of the company's wholly owned subsidiary Xi'an TCH in 2014, and income tax rate of Xi'an TCH for the year of 2013 was 25%. In July 2013, Xi'an TCH was re-approved for high-tech enterprise status and enjoyed a 15% preferential income tax rate effective January 1, 2013.
Net income for the full year of 2014 was $19.81 million, an increase of 26.8% as compared with $15.63 million in 2013. This increase in net income was mainly due to the increased interest income on sales-type leases and lower non-operating expenses in 2014 compared to 2013.
For the full year of 2014, basic and fully diluted EPS was $0.28, compared with $0.29 in 2013. ■