Exhibit 99.1
China Architectural Engineering Announces First Quarter 2010 Financial Results
ZHUHAI, China and NEW YORK, May 19, 2010 -- China Architectural Engineering, Inc. ("CAE" or the "Company") (Nasdaq: CAEI), a leader in the design, engineering, fabrication and installation of high-end building envelope systems, today announced its financial results for the first quarter ended March 31, 2010.
First Quarter 2010 Results
Revenues from contracts for the first quarter of 2010 were $11.5 million, versus $36.3 million in first quarter of 2009, as most of the international projects were completed in 2009, such as the Dubai Metro Red Line, Guangdong Science City Headquarter Phase I, and Doha High Rise Office Tower, and the Company ceased to conduct international projects. Gross profit was $2.3 million, compared to $8.2 million for the same period last year. The gross margin for the first quarter of 2010 was 20.3% versus 22.5% for the same time of prior year, due to increases in raw material, labor and administrative costs in the domestic market of China.
Selling, general and administrative expenses were $4.2 million for the first quarter of 2010, compared with $6.0 million a year ago. The decrease was primarily due to the revenue decrease. Payroll and related costs accounted for approximately 71.8% of total operating expenses, including a $2.0 million charge related to stock grants made in the first quarter of 2010. Consequently, operating loss was $1.9 million for the first quarter of 2010, versus the income from operation of $2.2 million a year ago.
Interest expenses and finance expenses were $1.6 million for the first quarter of 2010, an increase of $0.3 million from $1.3 million a year ago. The increase was mainly due to the use of short-term bank loans.
Income tax expense was $9,575 for the first three months of 2010 at an effective tax rate of -0.3%, compared with nil in taxes for the same period of 2009. The primary reason for the decrease was due to losses incurred by the operations of the Company as still suffering from the effects of the recent international financial crises.
Net loss was $3.5 million, or a net loss of $0.06 per fully diluted share, for the three months ended March 31, 2010, compared to net income of $0.9 million, or $0.02 earning per diluted share, for the same period in 2009.
Liquidity and Capital Resources
The Company had an unrestricted cash balance of approximately $0.5 million as of March 31, 2010, as compared to $0.7 million as of December 31, 2009. Net cash from operating activities was $6.9 million for the first quarter of 2010, compared to net cash from operating activities of $4.3 million for the first quarter of 2009.
Business Outlook
Mr. Ken Yi Luo, the Company's chief executive officer and chairman, commented, "Despite the recent trends in the global economy that had a significant adverse impact on the commercial construction industry as a whole, we are working diligently to concentrate our resources and capital in the domestic market. During this quarter, we made progress on several domestic projects and continued our efforts to leverage our patented technology, high quality design and extensive experience to provide technical consulting and advisory services. During this quarter, our shareholders also approved the acquisition of the majority interest of Shanghai ConnGame Network. We intend to keep our investors up-to-date and will make further announcements once the acquisition is complete. Furthermore, we remain confident in our ability to further CAEI's growth and we will continue to strive and maximize our shareholders' value going forward."
About China Architectural Engineering
China Architectural Engineering, Inc. (NASDAQ:CAEI) is a leader in the design, engineering, fabrication and installation of high-end curtain wall systems, roofing systems, steel construction systems, and eco-energy systems. Founded in 1992, CAEI has maintained its market leadership by providing timely, high-quality, reliable, fully integrated, and cost-effective solutions. Collaborating with world-renowned architects and building engineers, the Company has successfully completed nearly one hundred large, complex and unique projects worldwide, including numerous award-winning landmarks across Asia's major cities.
For further information on China Architectural Engineering, Inc., please visit http://www.caebuilding.com
Forward-Looking Statements
In addition to historical information, the statements set forth above may include forward-looking statements that may involve risk and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Actual results could differ materially from the expectations contained in forward-looking statements as a result of risks and uncertainties, including, but not limited to, identification and remediation of the Company's deficiencies and weaknesses in its internal controls over financial reporting, potential claims or litigation that may result from the occurrence of restatements, the negotiation and execution of a definitive acquisition agreement for the proposed acquisition of ConnGame and satisfactory completion of related due diligence and closing conditions, including but not limited to regulatory approvals; ability to identify and secure debt, equity, and/or other financing required to continue the operations of the Company, particularly in the event that the Company is not able to conduct the proposed acquisition of ConnGame; required Company payments under the waiver agreement and ability to obtain an extension; difficulties related to integration and management of the combined operations; reduction or reversal of the Company's recorded revenue or profits due to "percentage of completion" method of accounting and expenses; the Company's ability to obtain a modification for the Waiver agreement with the bondholders applicable to the proposed acquisition of ConnGame; increasing provisions for bad debt related to the Company's accounts receivable; adverse capital and credit market conditions; and various other matters, many of which are beyond our control. These and other factors that may result in differences are discussed in greater detail in the Company's reports and other filings with the Securities and Exchange Commission.
Investor Contact:
ICR:
Michael Tieu
Tel: +86-10-6599-7960
Email: michael.tieu@icrinc.com
Bill Zima
Tel: +1-203-682-8200
Email: bill.zima@icrinc.com
CHINA ARCHITECTURAL ENGINEERING, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31, 2009
(STATED IN US DOLLARS)
| | | March 31, | | | December 31, | |
| | | 2010 | | | 2009 | |
| | | (unaudited) | | | | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 497,348 | | | $ | 740,125 | |
| Restricted cash | | | 2,024,080 | | | | 3,033,819 | |
| Contract receivables, net | | | 88,281,494 | | | | 89,189,103 | |
Costs and earnings in excess of billings | | | 10,193,454 | | | | 8,100,580 | |
| Job disbursements advances | | | 1,957,233 | | | | 2,696,794 | |
| Other receivables | | | 25,821,226 | | | | 30,768,067 | |
| Inventories | | | 162,346 | | | | 727,499 | |
| Deferred income taxes, current | | | 112,893 | | | | 113,033 | |
| Other current assets | | | 497,884 | | | | 297,838 | |
| Total current assets | | | 129,547,958 | | | | 135,666,858 | |
| | | | | | | | | |
| Non-current assets | | | | | | | | |
| Plant and equipment, net | | | 2,361,334 | | | | 2,539,457 | |
| Intangible assets | | | 59,987 | | | | 70,610 | |
| Goodwill | | | 7,995,896 | | | | 7,995,896 | |
| Other non-current asset | | | 36,424 | | | | 287,586 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 140,001,599 | | | $ | 146,560,407 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Short-term bank loans | | $ | 7,856,554 | | | $ | 9,529,880 | |
| Accounts payable | | | 25,873,394 | | | | 26,614,484 | |
Billings over costs and estimated earnings | | | 5,346,341 | | | | 6,098,666 | |
| Amount due to shareholder | | | 3,504,156 | | | | 10,080,345 | |
| Other payables | | | 9,864,960 | | | | 9,360,314 | |
| Business and other taxes payable | | | 4,734,098 | | | | 4,923,771 | |
| Customers' deposits | | | 8,097,324 | | | | 6,392,676 | |
| Other Accrual | | | 6,034,195 | | | | 4,324,011 | |
| Total current liabilities | | | 71,311,022 | | | | 77,324,147 | |
| Non-current liabilities | | | | | | | | |
| Long term bank loans | | $ | 89,850 | | | $ | 109,239 | |
| Convertible bond payable, net | | | 25,475,167 | | | | 24,564,161 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | $ | 96,876,039 | | | $ | 101,997,547 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
Preferred stock, $0.001 par value, 10,000,000 shares authorized, | | | | | | | | |
| 0 shares issued and outstanding at March 31, 2009 and December 31, 2009; | | | | | | | | |
Common stock, $0.001 par value, 100,000,000 shares authorized, | | | | | | | | |
53,256,874 shares issued and outstanding at March 31, 2009 and | | | | | | | | |
December 31, 2009, respectively | | $ | 55,157 | | | $ | 53,257 | |
| Additional paid in capital | | | 28,458,440 | | | | 26,495,876 | |
| Statutory reserves | | | 3,040,595 | | | | 3,040,595 | |
Accumulated other comprehensive income | | | 3,986,558 | | | | 3,868,437 | |
| Retained earnings | | | 7,609,728 | | | | 11,131,084 | |
| Total Company shareholders' equity | | | 43,150,478 | | | | 44,589,249 | |
| Noncontrolling interests | | | (24,918 | ) | | | (26,389 | ) |
| Total shareholders' equity | | | 43,125,560 | | | | 44,562,860 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 140,001,599 | | | $ | 146,560,407 | |
CHINA ARCHITECTURAL ENGINEERING, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2010 AND 2009
(STATED IN US DOLLARS)
| | | Three Months Ended March 31, | |
| | | 2010 | | | 2009 | |
| | | | | | | | | |
| Contract revenues earned | | $ | 11,472,123 | | | $ | 36,343,064 | |
| Cost of contract revenues earned | | | (9,144,193 | ) | | | (28,162,233 | ) |
| Gross profit | | $ | 2,327,930 | | | $ | 8,180,831 | |
Selling, general and administrative expenses | | | (4,175,480 | ) | | | (5,951,030 | ) |
| Finance expenses | | | (47,201 | ) | | | -- | |
| Income / (Loss) from operations | | $ | (1,894,751 | ) | | $ | 2,229,801 | |
| Interest income | | | 2,416 | | | | 3,706 | |
| Interest expense | | | (1,626,111 | ) | | | (1,311,733 | ) |
| Other income | | | 7,514 | | | | 21,837 | |
| Other expenses | | | (849 | ) | | | -- | |
| | | | | | | | | |
| Income/(Loss) before taxation on | | $ | (3,511,781 | ) | | $ | 943,611 | |
| Continuing | | | | | | | | |
| Operations | | | | | | | | |
| Income tax / tax benefit | | | 9,575 | | | | -- | |
Net earnings/(Loss) including non-controlling interest | | | (3,521,356 | ) | | | 943,611 | |
Loss attributable to non-controlling interests | | | 1,471 | | | | -- | |
Net earnings/(Loss) attributable to the Company | | $ | (3,519,885 | ) | | $ | 943,611 | |
| | | | | | | | | |
| Earnings per share: | | | | | | | | |
| Basic | | $ | (0.06 | ) | | $ | 0.02 | |
| Diluted | | $ | (0.06 | ) | | $ | 0.02 | |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | |
| Basic | | | 54,729,908 | | | | 53,256,874 | |
| Diluted | | | 54,729,908 | | | | 53,256,874 | |
