XI'AN, China, Aug. 21 /PRNewswire-Asia-FirstCall/ -- China Recycling Energy Corp. (OTC:CREG) (BULLETIN BOARD: CREG) ("CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, on August 19, 2009 announced unaudited financial results for the second quarter of 2009 ended June 30, 2009. Highlights For Three months ended June 30, 2009 -- Revenue was $11.1 million compared to $4.3 million in the first quarter of 2009 and $2.6 million in the second quarter of 2008. -- Income from operations was $3.3 million, compared to $1.7 million in the first quarter of 2009 and $503,413 in the second quarter of 2008. -- General Administrative Expenses were $560,303, compared to $796,438 in the first quarter of 2009 and $855,169 in the second quarter of 2008. -- Net income was $3.2 million with a Diluted EPS of $0.07 versus net income of $1.1 million and a diluted EPS of $0.02 in the first quarter of 2009 and a net loss of $3.8 million and a diluted EPS of $(0.12) in the second quarter of 2008 (restated). -- Non-GAAP Net Income and Non-GAAP Diluted EPS, as defined below, was $3.3 million and $0.08 in the second quarter of 2009, compared to $1.5 million and $0.03 in the first quarter of 2009 and approximately $578,000 and $0.02 in the second quarter of 2008. For Six months ended June 30, 2009 -- Revenue was $15.5 million, compared to $2.6 million in the same period of 2008. -- Interest income from sales-type leases was $2.3 million versus $1.1 million in the same period of 2008. -- Income from operations was $5 million versus $419,755 in the same period of 2008. -- Net income was $4.3 million with a Diluted EPS of $0.10, compared to a net loss of $3.6 million and a Diluted EPS of $(0.17) in the same period of 2008 (restated). -- Non-GAAP Net Income from Operations, as defined below, was $5.4 million, compared with $1.1 million in the same period of 2008. -- Non-GAAP Net Income was $4.8 million with Non-GAAP Diluted EPS of $0.11, compared with approximately $639,000 and $0.02 in the same period of 2008. -- Net cash flow provided by operations was $9 million, compared with net cash used in operations of $3.8 million in the same period of 2008. -- Cash on hand at June 30, 2009 was $14.7 million versus $7.3 million at year-end 2008. "I am pleased with our results for the second quarter, which were driven by sales of our energy recycling systems to our customers," Mr. Guohua Ku, Chairman and CEO of CREG, said. "With one more system put into operation, we have achieved a significant move forward to build up a strong fleet of waste-to-energy systems, which not only creates additional clean energy for our customers but also generates steady cash revenue streams for us in the future. During the past six months, we had two major projects delivered to our customers. Compared with last year, we are in better financial position and have more confidence in our engineering prowess and performance capabilities. Now we are more confident and more ready to pursue the large-scale, clustered power system projects that we have engaged with some industrial giants in China. We are building up a brand that customers can trust." Summary of Financial Results (In '000s of U.S. Dollars, SIX MONTHS ENDED THREE MONTHS ENDED except for per share data) JUNE 30 JUNE 30 2008 2008 2009 (RESTATED) 2009 (RESTATED) Revenue 15,460 2,616 11,137 2,616 Gross profit 3,994 784 2,692 784 Income from Operations 4,971 420 3,267 503 Net income 4,310 (4,678) 3,235 (3,790) Diluted EPS 0.10 (0.17) 0.07 (0.12) Add: Compensation expenses for stock options 442 632 53 307 Amortization of discount on conversion feature of convertible notes 4,685 4,061 Non-GAAP Income from operations(1) 5,413 1,052 3,320 810 Non-GAAP net income(1) 4,752 639 3,288 578 Non-GAAP diluted EPS(1) 0.11 0.02 0.08 0.02 (1) CREG provides income from operations, net income and earnings per share on a non-GAAP basis that excludes non-cash, share-based compensation expense and non-cash interest expense on the amortization of the beneficial conversion feature for our convertible notes, as described below, to enable investors to better assess the Company's operating performance. The non-GAAP measures are described below and reconciled to the corresponding GAAP measure in the section below titled "About Non-GAAP Financial Measures." For Three Months Ended June 30, 2009 Financial Results For the second quarter of 2009, CREG generated revenue of $11.1 million, a 158.1% increase from $4.3 million in the first quarter of 2008 and a 325.6% growth from $2.6 million in the second quarter of 2008. CREG sold one energy recycling system in the second quarter. In the second quarter, product sales accounted for 85% of revenue while rental income from operational leases of industrial plants contributed the other 15%. CREG recorded only rental income revenue in the first quarter of 2009 and the second quarter of 2008. Gross profit was $2.7 million in the second quarter of 2009, compared with $1.3 million in the first quarter of 2009 and $783,807 in the second quarter of 2008. Gross margin was 24.2%, compared to 30% both in the first quarter of 2009 and the second quarter of 2008. The change in gross margin was primarily because of the higher profitability of the operational rental business compared with straight product sales. CREG did not record any product sales in the first quarter of 2009 or the second quarter of 2008. Interest income from sales-type leases in the second quarter of 2009 was $1.13 million, almost the same as $1.20 million in the first quarter of 2009 but 97.5% higher than $574,775 in the second quarter of 2008. The growth for last year was primarily due to the inception of one sales-type lease in December 2008 that began generating steady interest income this year. General and administrative expenses were $560,303 in the second quarter of 2009, down 29.6% from $795,438 in the first quarter of 2009 and 34.5% less than $855,169 in the second quarter of 2008. The decrease was primarily due to management's efficient control on employee compensation and marketing and our responsibility for the daily maintenance and repair of the energy saving system expenses. Non-GAAP Income from Operations, as defined below, was $3.3 million in the second quarter of 2009, compared with $2.10 million in the first quarter of 2009 and approximately $810,000 in the second quarter of 2008. GAAP income from operations in the second quarter of 2009 was $3.3 million compared with $1.7 million in the first quarter of 2009 and $503,413 in the second quarter of 2008. Non-GAAP net income in the second quarter of 2009 was $3.3 million, compared with $1.5 million in the first quarter of 2009 and approximately $578,000 in the second quarter of 2008. Non-GAAP diluted EPS in the second quarter of 2009 was $0.08 compared with $0.03 in the first quarter of 2009 and $0.02 in the second quarter of 2008. GAAP net income was $3.2 million in the second quarter of 2009, compared with $1.1 million in the first quarter of 2009 and a net loss of $3.8 million in the second quarter of 2008. GAAP diluted EPS was $0.07 in the second quarter of 2009, compared with $0.02 in the first quarter of 2009 and a diluted loss per share of $0.12 in the second quarter of 2008. For Six Months Ended June 30, 2009 Financial Results For the six months ended June 30, 2009, CREG had total revenue of $15.5 million, 490.9% more than the $2.6 million in revenue in the same period of 2008. Of the total revenue, product sales revenue was $9.5 million and rental income from operational leases was $6 million. In the same period of 2008, CREG had rental income of $2.6 million. Gross profit for the six months ended June 30, 2009 was $4 million, 409.5% higher than the $783,807 in the same period of 2008. Gross margin was 25.82% for the six months ended June 30, 2009 versus 30% in the same quarters of 2008. The change in gross margin was primarily because of higher profitability of operational rental business compared with straight product sales. For the six months ended June 30, 2009, interest income from sales-type leases was $2.3 million, a 104.7% increase from $1.1 million in the same period of 2008. The growth was primarily due to the inception of one sales-type lease in December 2008 that began generating steady interest income this year. General and administrative expenses were $1.4 million for the six months ended June 30, 2009, approximately 10% less than the $1.5 million over the same period of last year. The decrease was primarily due to management's efficient control of employee compensation and marketing and our responsibility for the daily maintenance and repair of the energy saving system expenses. For the six months ended June 30, 2009, Non-GAAP Income from Operations was $5.4 million compared with $1.1 million in the same period of 2008. GAAP operating income for the six months ended June 30, 2009 was $5 million compared with $0.42 million in the same period of 2008. For the six months ended June 30, 2009, Non-GAAP net income was $4.8 million, compared with $0.64 million in the same period of 2008. Non-GAAP diluted EPS for the six months ended June 30, 2009 was $0.11 compared with $0.02 in the same period of 2008. GAAP net income for the six months ended June 30, 2009 was $4.3 million compared with a net loss of $4.7 million in the same period of 2008. For the six months ended June 30, 2009, GAAP diluted EPS was $0.10, compared with a diluted loss per share of $0.17 in the same period of 2008. As of June 30, 2009, cash and cash equivalents were $14.7 million, compared with $7.3 million at year-end 2008. Total investments in sales-type leases were $25.4 million, compared with $16.8 million as of the end of 2008. Net working capital increased to $14 million, from $12.1 million at December 31, 2008. Total shareholders' equity was $39.1 million, compared with $32.4 million at December 31, 2008. Net cash provided by operating activities was $9 million in the six months of 2009, compared with net cash outflow from operations of $3.8 million in the same period of 2008. Business Outlook CREG reaffirms its expectations for 2009 revenue to be in the range of $33 million to $36 million, with net income, excluding non-cash charges, of approximately $8 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change. About Non-GAAP Financial Measures This press release contains non-GAAP financial measures for earnings that exclude the effect of non-cash, non-operating expenses related to the Convertible Notes issued in November 2007 and April 2008, respectively, as well as the compensation expenses for the fair value of stock options. CREG uses non-GAAP financial measures when it internally evaluates the performance of business and makes operating decisions, including internal budgeting and performance measurement. The Company believes that providing the non-GAAP measures is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand CREG's financial performance in comparison to historical periods, and it allows investors to evaluate CREG's performance using the same methodology and information as that used by the Company's management. However, investors need to be aware that non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and they involve the exercise of judgment for which charges are excluded from the non-GAAP financial measure. About China Recycling Energy Corp. China Recycling Energy Corp. (OTCBB: CREG.OB) ("CREG" or "the Company") is based in Xi'an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1% of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The management and engineering teams have over 20 years of experience in industrial energy recovery in China. For more information about CREG, please visit http://www.creg-cn.com/ . Safe Harbor Statement This press release may contain certain "forward-looking statements" relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. 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 at http://www.sec.gov/. All forward-looking statements attributable to the Company or 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. FINANCIAL TABLES TO FOLLOW CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF AS OF JUNE 30, 2009 DECEMBER 31, 2008 (UNAUDITED) (RESTATED) ASSETS CURRENT ASSETS Cash & cash equivalents $14,662,204 $7,267,344 Investment in sales type leases, net 3,296,294 1,970,591 Interest receivable on sales type leases 230,078 82,406 Prepaid expenses 20,451 3,849,087 Other receivables 112,178 102,850 Inventory 13,408,481 10,534,633 Total current assets 31,729,686 23,806,911 NON-CURRENT ASSETS Investment in sales type leases, net 22,131,128 14,837,879 Advance for equipment -- 2,642,889 Property and equipment, net 88,577 95,359 Construction in progress 4,499,480 3,731,016 Intangible assets, net 9,583 3,482 Total non-current assets 26,728,768 21,310,625 TOTAL ASSETS $58,458,454 $45,117,536 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $3,243,403 $1,186,902 Bank loan payable 2,927,443 -- Unearned revenues 658,675 658,415 Taxes payable 273,087 1,313,949 Accrued liabilities and other payables 2,623,401 3,528,527 Convertible notes 8,000,000 5,000,000 Total current liabilities 17,726,009 11,687,793 DEFERRED TAX LIABILITY 946,845 823,407 ACCRUED INTEREST ON CONVERTIBLE NOTES 335,836 168,494 CONTINGENCIES AND COMMITMENTS STOCKHOLDERS' EQUITY Common stock, $0.001 par value; 100,000,000 shares authorized, 38,778,035 and 36,425,094 shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively 38,778 36,425 Additional paid in capital 36,387,842 33,947,963 Statutory reserve 1,883,400 1,319,286 Accumulated other comprehensive income 3,581,495 3,582,587 Accumulated deficit (2,718,249) (6,464,598) Total Company stockholders' equity 39,173,266 32,421,663 Noncontrolling interest 276,498 16,179 Total equity 39,449,764 32,437,842 TOTAL LIABILITIES AND EQUITY $58,458,454 $45,117,536 CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, 2009 2008 2009 2008 (RESTATED) (RESTATED) Revenue Sales of products $9,513,077 $-- $9,513,077 $-- Rental income 5,946,892 2,616,416 1,623,999 2,616,416 Total revenue 15,459,969 2,616,416 11,137,076 2,616,416 Cost of sales Cost of products 7,317,751 -- 7,317,751 -- Rental expense 4,148,572 1,832,609 1,126,899 1,832,609 Total cost of sales 11,466,323 1,832,609 8,444,650 1,832,609 Gross profit 3,993,646 783,807 2,692,426 783,807 Interest income on sales-type leases 2,333,472 1,139,727 1,134,941 574,775 Total operating income 6,327,118 1,923,534 3,827,367 1,358,582 Operating expenses General and administrative expenses 1,355,741 1,503,779 560,303 855,169 Total operating expenses 1,355,741 1,503,779 560,303 855,169 Income from operations 4,971,377 419,755 3,267,064 503,413 Non-operating income (expenses) Interest income -- 14,846 -- 14,846 Interest expense (433,768) (4,664,384) (375,549) (3,921,106) Financial expense (2,764) (1,001) (670) (579) Other income -- 1,604 -- 23 Exchange loss (2,389) (80,445) (2,389) (69,256) Total non-operating expenses (438,921) (4,729,380) (378,608) (3,976,072) Income (loss) before income tax 4,532,456 (4,309,625) 2,888,456 (3,472,659) Income tax expense 225,151 368,498 (342,960) 317,551 Net income (loss) from operations 4,307,305 (4,678,123) 3,231,416 (3,790,210) Less: Net income attributable to noncontrolling interest (3,158) 56 (3,198) 29 Net income (loss) 4,310,463 (4,678,179) 3,234,614 (3,790,239) Other comprehensive item Foreign currency translation gain (loss) (1,092) 1,110,475 28,803 1,035,750 Comprehensive income (loss) $4,309,371 $(3,567,704) $3,263,417 $(2,754,489) Basic weighted average shares outstanding 37,348,071 27,718,959 38,260,905 30,422,829 Diluted weighted average shares outstanding 43,511,301 32,639,681 44,600,370 34,602,018 Basic net earnings per share $0.12 $(0.17) $0.08 $(0.12) Diluted net earnings per share $0.10 $(0.17) $0.07 $(0.12) * Interest expense on convertible notes are added back to net income for the computation of diluted EPS * Diluted weighted average shares outstanding includes shares estimated to be converted from the Second Note issued on April 29, 2008 with conversion price contingent upon future net profits. * Basic and diluted loss per share is the same due to anti-dilutive feature of the securities. CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2009 2008 (RESTATED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) including noncontrolling interest $4,307,305 (4,678,123) Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities: Depreciation and amortization 15,018 5,000 Amortization of discount related to conversion feature of convertible note -- 4,684,932 Stock option compensation expense 442,191 632,444 Accrued interest on convertible notes 167,342 (20,548) Changes in deferred tax 123,438 -- (Increase) decrease in current assets: Accounts receivable -- (843,015) Interest receivable on sales type leases 230,051 -- Prepaid expenses 3,899,203 (9,213,073) Other receivables (1,708) (22,193) Inventory (299,355) -- Increase (decrease) in current liabilities: Accounts payable 2,055,791 4,392,250 Taxes payable (1,041,599) 267,704 Accrued liabilities and other payables (906,267) 1,041,821 Net cash provided by (used in) operating activities 8,991,410 (3,752,801) CASH FLOWS FROM INVESTING ACTIVITIES: Investment in sales type leases (8,988,974) 559,436 Acquisition of property & equipment (14,297) (85,789) Construction in progress (766,900) (5,613,063) Net cash used in investing activities (9,770,171) (5,139,416) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 2,000,000 9,032,258 Issuance of convertible notes 3,000,000 5,000,000 Bank loan payable 2,927,101 -- Cash contribution from noncontrolling interest 263,439 -- Due from management (3,440) (73,906) Net cash provided by financing activities 8,187,100 13,958,352 EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS (13,479) 301,119 NET INCREASE IN CASH & CASH EQUIVALENTS 7,394,860 5,367,254 CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 7,267,344 1,634,340 CASH & CASH EQUIVALENTS, END OF PERIOD $14,662,204 $7,001,594 Supplemental Cash flow data: Income tax paid $1,074,560 $105,433 Interest paid $261,858 $-- DATASOURCE: China Recycling Energy Corp. CONTACT: In China: In China, Mr. Leo Wu, Investor Relations of China Recycling Energy Corp., +86-136-3025-2595, Web site: http://www.creg-cn.com/

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