Welcome to the Cleantech Solution International Q1 2014 Earnings Conference Call. First of all this call, all participants will be in listen-only mode. And afterward there will be a question-and-answer session. Elaine, please begin.
Thank you, operator. Good morning, ladies and gentlemen and good evening to those of you joining in from China. I'd like to welcome all of you to Cleantech Solutions' earnings conference call for the first quarter of 2014.
With me today on the call are Cleantech Solutions' CFO, Mr. Adam Wasserman and Vice President of Operations, Mr. Ryan Hua. Also on the call is Maple Jong from Compass Investor Relations, who will provide translation for Mr. Hua.
At this time, I remind our listeners that on this call management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and that management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor in its forward-looking statements the risk contained in the Private Securities Litigation Reform Act of 1995.
Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the U.S. Securities and Exchange Commission, 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, 2013. And management’s discussion and analysis of financial condition and results of operations in our Form 10-Q for the quarter ended March 31, 2014.
In addition, any projections as to the Company's future performance represent management's estimates and are made as of today May 16, 2014. Cleantech Solutions International assumes no obligation to update these projections in the future as conditions change.
At this point, I would also like to state that on this call, we will be discussing a non-GAAP financial measure, adjusted EBITDA. We present this measure as a supplement to our GAAP results, because we believe it provides useful information in analyzing and benchmarking the performance of our operations and assist investors in analyzing our year-over-year financial performance. Please visit our earnings press release, a copy of which is on our website and has been filed with the SEC as an exhibit to our Form 8-K for a complete reconciliation of adjusted EBITDA to the closest GAAP measure.
And now, it’s my pleasure to welcome Cleantech Solutions' CFO, Mr. Adam Wasserman who will deliver management’s prepared remarks, covering operations and financial performance today. Adam, please proceed.
Thank you, Elaine. Good morning, everyone and thank you for joining us for our call today. We appreciate your continued support and interest in Cleantech Solutions. We begin the year on a positive note generating profitable growth and strong operating cash flow. Our dyeing machine segment continues to see strong momentum with sales increasing 28% year-over-year to $9.4 million.
We saw strong order flow for our low-emission airflow dyeing machines and after treatment compacting machines, especially on our high-end models. We believe this is due to the increasing number of textile manufactures seeking to comply with the Chinese government's more aggressive pollution control requirement in the dyeing industry.
Just a few weeks ago, the Chinese government (paid) [ph] sweeping reform to its environmental protection laws that go into effect January 1, 2015. The new reform sends a strong message that environmental protection is a top priority for China. We also provide the government and the public who choose to have enforce these reforms including daily fines on violated, who’ve failed to improve and avenues for whistle blowers to report complaints.
We have seen how powerful environmental policies can be when aggressively enforced. A few years ago, local governments in our home province of Jiangsu, put policies in place that encourage textile manufactures to reduce pollution from the dyeing process. The result was sustained growth in orders for our appended low-emission airflow dyeing machines.
With similar policies going into effect on a national level, we see lot of opportunity for future growth. We continue to utilize our operating cash flow to increase the capacity of our dyeing equipment segment spending about $2.9 million to expand production capacity and purchase equipment during the first quarter. We plan to gradually increase production capacity to meet demand.
We are also developing new products to support future growth, such as a new garment and washing machines at Denim. Made of stainless steel and customized for use by Chinese jean manufactures, the machine is capable of stone wash and dime wash and other wash -- water washing techniques.
We believe our machine will offer superior quality and performance at an attractive price relative to machines imported from Germany and U.S and expected to be well received by potential customers. We are also currently building a prototype of this machine for one of our existing customers and help to receive follow-on orders if their prototype is accepted. In our forward production business, sales to customers in the wind power industry were relatively flat as we shifted our focus to customers and industries with more favorable growth dynamics.
As a result, sales support products to other industries grew nearly 60% year-over-year to $4.5 million. Going forward, we intended to devote a greater marketing effort for sales of forged products to customers in heavy equipment industries. We remain optimistic that we will generate sales from our products for the oil and gas industry in 2014 although we have not received any order to-date and we cannot predict the size or timing of any of the sales or whether we will receive orders.
We’re putting less emphasis on our marketing forged products to customers in the wind power industry, we still remain -- believe they is a potential for growth over the longer term. Once issues such as [indiscernible] and curtailment are resolved, we expect the Chinese government's commitment to renewable energy to increase demand for our forged rolled rings and related components in the future.
Looking ahead, we expect that dyeing machine segment to be our primary growth driver in the coming months as environmental factors in China continue to drive textile manufacturers to replace old and inefficient equipment for more environmentally friendly models. We will expand our capacity to meet this demand and introduce new products to help generate future growth.
Now let’s take a closer look at our financial performance. I would encourage you to refer to our Form 10-Q filed with the SEC and our earnings press release issued yesterday. Our revenue for the first quarter of 2014 increased 27% to 17.6 million compared to 13.9 million for the same period of 2013. Our gross profit for the quarter rose 37% to 4.3 million compared to 3.1 million for the same period in 2013. Gross margin improved to 24.2% during the first quarter of 2014, compared to 22.5% for the same period a year ago.
The increase in gross margin for the quarter was primarily due to increased operational and cost efficiencies for both the forged rolled rings and related products and dyeing equipment segments, reflecting the allocation of fixed costs primarily consisting in depreciation over a higher production level and a slight decrease in our raw materials cost in the forged rolled rings and related products segment.
Operating expenses increased 18% to $1 million as compared to $0.8 million for the comparable period last year. The increase was primarily due to higher selling, general and administrative expenses associated with higher payroll and related benefits, traveling, entertainment and shipping expenses associated with expanding the business along with research and development expenses related to our new dyeing equipment. Depreciation expense allocated to operating expenses was relatively flat at $100,000.
Our operating income was 3.3 million, up from 2.3 million in the same period of 2013. Income tax expense was $0.9 million compared to $0.6 million in that same period of 2013. The increase in income tax expenses was primarily attributable to the increase in taxable income generated by our operating entities.
Adjusted EBITDA, a non-GAAP measure, which adds back the net income interest expense, income taxes, depreciation and amortization, was ($5.3) [ph] million, (up) [ph] from $3.9 million in the first quarter of last year. Net income was $2.4 million, or $0.68 per basic and diluted share, compared to $1.6 million, or $0.56 per basic and diluted share in the first quarter of 2013.
Let’s turn to our balance sheet. As of March 31, 2014, we had cash and cash equivalents of $2 million compared to $1.1 million at December 31, 2013. Accounts receivable were $13.7 million and our total current assets were ($23.3) [ph] million. We had 3.1 million in short-term bank loans payable, stockholders equity was $93.1 million.
In the first quarter of 2014, we generated $3.8 million in cash flow from operations, 1.7 million in the first quarter of 2013. This was used to fund approximately $2.9 million in capital expenditures to expand production capacity and purchase equipment for its dyeing and finishing equipment segment.
In conclusion, we hold a positive outlook for our business for the rest of the year. The Chinese government stated more aggressive pollution control requirements. We expect the dyeing machine equipment segment to continue to generate strong order growth. We will gradually increase our production capacity to meet growing demand and expand our product line to address new and existing end markets. We believe we are positioning our company for future success. We will continue to utilize our expertise in manufacturing precision products to meet the needs of heavy equipment in clean technology industries as we seek profitable growth.
We want to thank you all to our investors for your continued support. With that we will now open the call to Q&A for the audience.
Thank you management. We will now begin our question-and-answer session. (Operator Instructions). Now I’ll pass back to Adam for conclusion.
Thank you, operator. On behalf of the entire Cleantech Solutions International management team, we want to thank you for your interest and participation in this call. Also if you have any interest in visiting our office and the factory in China, please let us know. We look forward to speaking with you again on our next earnings conference call. Thank you.
This concludes our conference call. Thank you all for attending. You may disconnect now. Goodbye.
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