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China Housing & Land Development Reports Strongly Higher Sales and Net Income for the Year 2007
Friday March 28 11:47 PM
Mr. Pingji Lu, chairman and chief executive officer of China Housing & Land Development, Inc., said, "We are very pleased to report our strong results for 2007. Our positioning in the robust real estate development market in greater Xi'an, along with the excellent execution of our strategies, has created our attractive performance in 2007."
He continued, "We believe our market growth in the next decade will be driven by seven factors: the continuing migration from rural to urban areas as people seek higher incomes and greater wealth, China's "Go West" policy that encourages people to move from the high-density cities on China's eastern coast to growing regions like Xi'an, China's continuing double-digit economic growth, the development of new technology companies in the region, multinational corporations that are choosing our area for their Chinese headquarters, Xi'an's city-center tourism redevelopment plan that will move 450,000 citizens from the inner city to the outer regions of the city, and more specifically, our operations in the Baqiao area eight kilometers east of the Xi'an city center. In the Baqiao housing and land development project, we are responsible for the creation of infrastructure, and the creation and sale of housing, commercial, and industrial facilities within our 487 acres. All of our projects are advancing nicely."
Year 2007 Results
Revenues
Total revenues for the year 2007 increased 36.6 percent to $73,912,850 from $54,099,486 in 2006.
Looking at revenues by our major projects, Project Tsining-24G revenues in 2007 grew 93.9 percent to $25,198,128 compared with $12,994,000 in 2006. The increase was due to the block sale of the hotel portion of one building in 2007.
Project Tsining JunJing I revenues in 2007 declined 77.4 percent to $8,964,783 from $39,649,762 in 2006 due to the absence in 2007 of the 2006 completion and delivery of all the units in nine buildings to all customers; therefore we recognized all the revenues for the nine buildings in 2006.
The Baqiao infrastructure construction project generated revenues of $10,790,610 in 2007 compared with no revenue in 2006, since the project was established in 2007. The revenues were generated from the completion of one damn, river management, a two kilometer road, and the suburban planning for the entire Baqiao high-tech industrial park.
The Baqiao land development project generated revenues in 2007 of $24,405,717 compared with no revenue in 2006, since the business also was established in 2007. The revenues were generated by the sale of a subsidiary that owns the right to use and develop about 18.5 acres of land in the project.
Revenues in 2007 for Additional projects grew 320.6 percent and totaled $4,220,087 compared with $1,003,412 in 2006. Additional projects principally included small projects. The increase in Additional projects revenues in 2007 was primarily due to the sale of an occupied residential-commercial building and the sale of several units in the company's older projects.
Other income decreased 26.3 percent to $333,525 from $452,312 in 2006 primarily due to the absence in 2007 of a property clean-up project performed in 2006.
Cost of goods sold
The cost of sales in 2007 increased 17.6 percent to $43,221,757 compared with $36,749,683 in 2006. The primary sources of the increased cost were the Baqiao infrastructure construction and land development projects that were new in 2007.
Selling, general, and administrative expenses
Selling, general, and administrative expenses for 2007 decreased 8.7 percent to $2,919,360 from $3,197,310 in 2006. The decrease in selling, general, and administrative expenses was due primarily to the new Enterprise Resources Planning system adopted by the company in 2007 to control daily expenses.
Other expenses
Other expenses in 2007 decreased 80.9 percent to $57,416 compared with $301,158 in 2006. The 2007 decline was primarily due to the 2007 absence of the expenses in 2006 associated with the normal added finishing in the Tsining JunJing I and Tsining 24G projects desired by the customers to reach final satisfaction.
Interest Expense
Interest expense in 2007 increased 471.6 percent to $1,652,349 from $289,083 in 2006. The increase in 2007 was due primarily to the financing associated with the purchase of the company that owned the exclusive right to develop the Baqiao project and perform the related infrastructure construction.
Change in fair value of warrants
In 2006 and 2007 the company issued common shares with warrants. The warrants permit the shareholders to buy additional common shares at the prices specified in the warrant agreements. In 2007, shareholders exercised a total of 169,147 warrants to buy a total of 74,679 common shares. No warrants were exercised in 2006.
When a shareholder exercises a warrant to buy common shares, typically only when the stock price is higher than the warrant exercise price, the shareholder covers the exercise price and company covers the balance of the value to provide the common shares.
In addition, at year end 2007, the company was required to estimate the fair value of its remaining warrants outstanding, and it chose to use the Cox-Ross-Rubinstein Binomial Lattice valuation model to estimate their fair value.
The $632,296 reported in 2007 as the Change in fair value of warrants consists of (a) the cost to the company of the common shares issued as a result of the exercise of warrants in 2007 and (b) the estimated cost to the company to provide the common shares, assuming that all the warrants will be exercised sometime in the future. The basis for estimating the cost to provide those common shares was provided by the valuation model.
Effective income tax rate
The effective income tax rate for the year 2007 was 34.38 percent, up slightly from 33.26 percent in 2006. The increase was due primarily to one of the company's operations whose required structure for owning two subsidiaries creates costs that cannot be used to reduce the company's tax obligation.
Net income
Net income for the year 2007 increased 84.4 percent to $16,686,116 from $9,050,810 for the year 2006. The increase was primarily due to the 2007 addition of the two Baqiao projects, partly offset by the absence of the 2006 sales of the Tsining JunJing I and Tsining 24G projects, the 2007 change in the fair value of the warrants, and the higher interest expense associated with the Baqiao projects in 2007.
Earnings per share
Basic and diluted earnings per share were $0.62 in 2007, up 37.8 percent from $0.45 in 2006. The basic and diluted earnings per share were both $0.62 in 2007 because the warrants were anti-dilutive. Likewise, the basic and diluted earnings per share were both $0.45 in 2006 for the same reason.
Basic and diluted earnings per share were based on weighted average shares outstanding of 26,817,388 for 2007 and 20,277,615 for 2006. The 32.3 percent increase in the weighted average shares outstanding was due to the common shares with warrants issued in 2007.
Gain on foreign exchange
The company operates in China and accounts in the Chinese renminbi but reports its financial results in U.S. dollars, based on the exchange rates of the two currencies. During 2006 and 2007, the renminbi appreciated in value against the U.S. dollar, which when translating the operating results and financial positions at different exchange rates created the accrued gain on foreign exchange.
Cash flow discussion
Cash flow from operating activities in 2007 increased 35.8 percent to $8,611,383 from 2006, primarily due to higher net income from the sale of real estate and profit from the sale of land use rights.
Cash flow from investing activities in 2007 consumed $25,020,248, up 70.4 percent from 2006, primarily due to higher expenditures to acquire a company that held the right to develop the Baqiao project, and the absence of the 2006 purchases of buildings, equipment, and automobiles.
Cash flow from financing activities in 2007 provided $18,415,997, up 111.8 percent from 2006, primarily due to the issuance of common stock and warrants, partly offset by payments on loans.
As a result of the above cash flow changes from operating, investing, and financing activities, the increase in cash for the year 2007 was $2,007,132 compared with $358,864 in 2006.
Debt leverage
Total debt outstanding at year end 2007 was $27,922,125 compared with $29,707,492 at year end 2006. Net debt outstanding (total debt less cash) at year end 2007 was $25,469,759 compared with $28,219,588 at year end 2006. The company's net debt as a percent of total capital (net debt plus shareholders' equity) was 27.79 percent at year end 2007 and 59.49 percent at year end 2006. The reduction in net debt leverage was primarily due to the issuance of common stock and warrants and the net reduction in loans.
Total debt consists of the sum of the balance sheet lines titled payable to original shareholders, loans payable to New Land's previous shareholders, loans from employees, and loans payable.
About China Housing & Land Development, Inc.
Based in Xi'an, the capital city of Shaanxi province in China, China Housing & Land Development, Inc., is a leading private developer of residential and commercial properties in northwest China. China Housing has been engaged in land acquisition, development, and management, including the sales of commercial and residential real estate properties through its wholly-owned subsidiary in China, since 1992.
In 2006, China Housing & Land Development became a U.S. publicly traded company registered in the state of Nevada in the U.S.A. By leveraging its strong relationships with China's local state authorities, China Housing & Land Development, Inc., has been able to capitalize on the supply of available land and develop commercial and residential properties, further enhancing China Housing's brand recognition and outperforming its competitors in medium size residential and commercial real estate developments in the region of Xi'an.
Conference call and webcast
China Housing & Land Development will webcast its earnings conference call at 8:00 a.m. eastern daylight time (U.S.A.) on Monday, March 31, 2008. A live audio broadcast of the conference call will be available on the investor relations page of the company's website at http://www.chldinc.com.
Safe Harbor
This news release may contain forward-looking information about China Housing & Land Development, Inc., which is covered under the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as believe, expect, may, will, should, project, plan, seek, intend, or anticipate or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and China Housing & Land Development's future performance, operations, and products.
Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Actual performance results may vary significantly from expectations and projections. Further information regarding this and other risk factors are contained in China Housing & Land Development, Inc.'s public filings with the U.S. Securities and Exchange Commission. All information provided in this news release and in the attachments is as of March 28, 2008, and the Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
China Housing & Land Development news releases, project information, photographs, and more are available on the internet at http://www.chldinc.com.
Financial statements follow:
Income statement, balance sheets, cash flow, and shareholders' equity.
FINANCIAL STATEMENTS
CHINA HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2007, 2006, and 2005
2007 2006 2005
----------- ----------- -----------
Revenues
Sales of properties $73,579,325 $53,647,174 $32,450,037
Other income 333,525 452,312 335,681
----------------------------------------------------------------------
Total revenues 73,912,850 54,099,486 32,785,718
----------------------------------------------------------------------
Costs and expenses
Cost of sales 43,221,757 36,749,683 21,236,598
Selling, general and
administrative expenses 2,919,360 3,197,310 3,632,627
Other expense 57,416 301,158 103,572
Interest expense 1,652,349 289,083 741,880
Change in fair value of
warrants 632,296 - -
----------------------------------------------------------------------
Total costs and expenses 48,483,178 40,537,234 25,714,677
----------------------------------------------------------------------
Income before provision for income
taxes 25,429,672 13,562,252 7,071,041
Provision for income taxes 8,743,556 4,511,442 2,333,444
----------------------------------------------------------------------
Net income 16,686,116 9,050,810 4,737,597
Gain on foreign exchange 3,617,405 655,435 242,783
----------------------------------------------------------------------
Comprehensive income $20,303,521 $ 9,706,245 $ 4,980,380
----------------------------------------------------------------------
Weighted average shares outstanding
Basic 26,871,388 20,277,615 20,000,000
----------------------------------------------------------------------
Diluted 26,871,388 20,277,615 20,000,000
----------------------------------------------------------------------
Earnings per share
Basic $ 0.62 $ 0.45 $ 0.24
----------------------------------------------------------------------
Diluted $ 0.62 $ 0.45 $ 0.24
----------------------------------------------------------------------
See accompany notes to consolidated financial statements
CHINA HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 2007 and December 31, 2006
December 31, December 31,
2007 2006
------------ ------------
ASSETS
Cash $ 2,351,015 $ 379,633
Cash - restricted 101,351 1,108,271
Accounts receivable, net of allowance for
doubtful accounts of $94,514 and $79,118,
respectively 12,107,882 3,070,516
Other receivables, prepaid expenses and
other assets 622,759 986,039
Notes receivable, net 947,918 2,127,271
Real estate
Finished projects 16,130,130 37,247,436
Construction in progress 24,856,801 9,730,650
----------------------------------------------------------------------
Total real estate held for development or
sale 40,986,931 46,978,086
----------------------------------------------------------------------
Property and equipment, net 5,707,012 17,701,896
Asset held for sale 12,910,428 -
Advances to suppliers 2,071,549 493,570
Deposits on land use rights 29,694,103 -
Intangible asset, net 48,205,697 -
----------------------------------------------------------------------
Total assets $155,706,645 $72,845,282
----------------------------------------------------------------------
LIABILITIES
Accounts payable 9,311,995 5,324,815
Advances from customers 5,258,351 2,902,426
Accrued expenses 1,903,451 1,738,584
Payable to original shareholders - 5,462,798
Loans payable to New Land's previous
shareholders 11,413,229 -
Income and other taxes payable 22,711,981 11,386,169
Other payables 3,881,137 2,572,838
Loans from employees 2,388,862 1,037,842
Loans payable 14,120,034 23,206,852
Deferred tax 15,907,880 -
Warrants liability 2,631,991 -
----------------------------------------------------------------------
Total liabilities 89,528,911 53,632,324
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock: $.001 par value, authorized
100,000,000 shares issued and outstanding
30,141,887 and 20,619,223, respectively 30,142 20,619
Additional paid in capital 28,381,534 7,192,600
Statutory reserves 2,885,279 2,150,138
Retained earnings 30,365,156 14,414,181
Capital contribution receivable - (5,462,798)
Accumulated other comprehensive income 4,515,623 898,218
----------------------------------------------------------------------
Total shareholders' equity 66,177,734 19,212,958
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $155,706,645 $72,845,282
----------------------------------------------------------------------
See accompany notes to consolidated financial statements
CHINA HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 2007, 2006, and 2005
2007 2006 2005
------------- ------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 16,686,116 $ 9,050,810 $ 4,737,597
Adjustments to reconcile
net income to cash
provided by (used in)
operating activities:
Depreciation 423,932 354,444 124,404
Gain on disposal of fixed
assets (48,347) (149,830) -
Amortization of stock
issued for investor
relations fees 131,400 - -
Amortization on
intangible assets 1,157,758 - -
Loss on investment - - 6,597
Change in fair value of
warrants 632,296 - -
Non-cash proceeds from
sales (10,783,201) - -
(Increase) decrease in
assets:
Accounts receivable (8,463,433) 77,630 82,371
Real estate 13,696,294 3,640,231 (2,613,747)
Advance to suppliers (1,480,596) 11,930,759 (6,672,673)
Deposit on land use
rights (17,695,934) - -
Other receivable and
deferred charges 658,893 (1,118,155) (1,248,884)
Increase (decrease) in
liabilities:
Accounts payable 2,556,717 2,716,495 (1,737,640)
Advances from customers 2,066,546 (28,428,381) 3,913,777
Accrued expense 42,522 1,625,843 2,596,303
Other payable (1,016,610) (266,309) (123,000)
Income and other taxes
payable 10,047,030 6,909,809 (2,242,998)
----------------------------------------------------------------------
Net cash provided by
(used in) operating
activities 8,611,383 6,343,346 (3,177,893)
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Change in restricted cash 1,039,410 591,312 1,586,420
Purchase of buildings,
equipment and automobiles (244,355) (13,269,773) (2,834,214)
Notes receivable collected,
net 1,272,541 (2,246,025) -
Proceeds from sale of fixed
assets - 243,616 -
Proceeds from sale of long
term investment - - 492,000
Payments to acquire
subsidiary, net of cash
received (27,087,844) - -
----------------------------------------------------------------------
Net cash used in
investing activities (25,020,248) (14,680,870) (755,794)
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Loan proceeds 3,944,359 13,835,303 14,760,000
Payments on loans (14,202,410) (7,905,887) (10,824,000)
Loans from employees, net 1,226,736 1,016,551 -
Loans from New Land
previous shareholders 4,207,315 - -
Proceeds from issuance of
common stock and warrants 23,239,997 1,750,421 -
----------------------------------------------------------------------
Net cash provided by
financing activities 18,415,997 8,696,388 3,936,000
----------------------------------------------------------------------
Increase in cash 2,007,132 358,864 2,313
Effects on foreign currency
exchange (35,750) (9,976) 706
----------------------------------------------------------------------
Net increase in cash 1,971,382 348,888 3,019
CASH, beginning of period 379,633 30,745 27,726
----------------------------------------------------------------------
CASH, end of period $ 2,351,015 $ 379,633 $ 30,745
----------------------------------------------------------------------
Supplemental disclosure of
cash flow information:
Cash paid for interest
expense $ 1,975,917 $ 2,147,800 $ 170,928
----------------------------------------------------------------------
Cash paid for income taxes $ 384,615 $ - $ 2,476,096
----------------------------------------------------------------------
See accompany notes to consolidated financial statements
CHINA HOUSING & LAND DEVELOPMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 2007, 2006 and 2005
Common Stock
------------------
Additional
Par paid-in Statutory
Shares Value capital reserves
----------------------------------------------------------------------
BALANCE, December 31, 2005 20,000,000 $20,000 $ 5,442,798 $1,234,178
Common stock issued for
cash at $3.25 619,223 619 1,749,802 -
Net income - - - -
Adjustment to statutory
reserve - - - 915,960
Capital contribution
receivable - - - -
Foreign currency
translation adjustment - - - -
----------------------------------------------------------------------
BALANCE, December 31, 2006 20,619,223 20,619 7,192,600 2,150,138
Common stock issued for
consulting service 60,000 60 131,340 -
Common stock and warrants
issued at $2.70 9,387,985 9,388 20,532,623 -
Common stock issued from
warrants conversion 74,679 75 524,971 -
Net income - - - -
Adjustment to statutory
reserve - - - 735,141
Capital contribution
receivable - - - -
Foreign currency
translation adjustment - - - -
----------------------------------------------------------------------
BALANCE, December 31, 2007 30,141,887 $30,142 $28,381,534 $2,885,279
----------------------------------------------------------------------
Accumulated
Capital other
Retained contribution comprehensive
earnings receivable income Totals
----------------------------------------------------------------------
BALANCE,
December 31,
2005 $ 6,279,331 $ - $ 242,783 $13,219,090
Common stock
issued for
cash at $3.25 - - - 1,750,421
Net income 9,050,810 - - 9,050,810
Adjustment to
statutory
reserve (915,960) - - -
Capital
contribution
receivable - (5,462,798) - (5,462,798)
Foreign
currency
translation
adjustment - - 655,435 655,435
----------------------------------------------------------------------
BALANCE,
December 31,
2006 14,414,181 (5,462,798) 898,218 19,212,958
Common stock
issued for
consulting
service - - - 131,400
Common stock
and warrants
issued at
$2.70 - - - 20,542,011
Common stock
issued from
warrants
conversion - - - 525,046
Net income 16,686,116 - - 16,686,116
Adjustment to
statutory
reserve (735,141) - - -
Capital
contribution
receivable - 5,462,798 - 5,462,798
Foreign
currency
translation
adjustment - - 3,617,405 3,617,405
----------------------------------------------------------------------
BALANCE,
December 31,
2007 $30,365,156 $ - $4,515,623 $66,177,734
----------------------------------------------------------------------
See accompany notes to consolidated financial statements
Contact:
China Housing & Land Development, Inc. Investors and Media: Jing Lu, +86 29.8258.2632 in Xi'an Vice President & Board Secretary jinglu@chldinc.com or William Xin +86 150.9175.2090 in Xi'an +1 917.371.9827 in San Francisco Chief Financial Officer william.xin@chldinc.com or Christensen Investor Relations Tom Myers, +86 139.1141.3520 in Beijing tmyers@christensenir.com or Kathy Li, +1 212.618.1978 in New York kli@christensenir.com
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