DALIAN, China, May 12 /PRNewswire-Asia/ -- China Industrial Waste Management, Inc. (OTC Bulletin Board: CIWT) ("China Industrial Waste Management" or the "Company"), a leading environmental services and solutions provider in China, today announced its results for the first quarter ended March 31, 2010.
First Quarter Highlights
-- Revenues increased 154.0% to $4.1 million compared to the first quarter
of 2009
-- Gross profit more than doubled to $2.7 million
-- Gross margin increased to 65.4% from 54.8%
-- Operating income increased over eight-fold to $1.6 million
-- Operating margin increased to 38.1% from 11.3%
-- Net income was $0.6 million, or $0.04 per diluted share, compared to
$0.1 million, or $0.01 per diluted share
-- Adjusted net income, excluding the impact of a one-time non-cash
settlement expense related to a consulting firm which provided business
advisory and private placement services to the Company, was $1.0
million, or $0.06 per diluted share.*
-- Operating cash flow was $1.1 million versus negative cash flow from
operations of $0.9 million in the prior year period
-- Dongtai Organic, the Company's sludge treatment business, began
generating revenues, contributing $1.0 million to first quarter sales
-- Received a $3.1 million subsidy from the PRC government toward the
construction of the Hazardous Waste Treatment Center of Changsha City,
Hunan Province
"We are very pleased with our first quarter results," said Mr. Jinqing Dong, Chief Executive Officer. "Our sales rose as our customers increased their production volumes as they continue to benefit from the global economic recovery. We also started seeing meaningful revenues from our Dongtai Organic sludge treatment business for the first time this quarter. Finally, we sold a greater volume of recycled commodities as the prices were much more favorable than what we have seen in the recent past. Our bottom line benefited from the rise in sales, the high gross margin contribution from our recycled commodities sales, and from the operating leverage in our business."
First Quarter 2010 Results
For the three months ended March 31, 2010, revenues were $4.1 million compared to $1.6 million in the same period last year, an increase of 154.0%.
Revenues from service fees, which consist of service fees generated from industrial solid waste treatment, sewage treatment and sludge treatment, were $2.9 million, or 71.9% of revenues, compared to $1.2 million, or 74.3% of revenues, in the same period last year. The 145.9% increase in revenues from service fees is mainly attributable to an increase in the Company's solid waste treatment business, as production volumes from the Company's industrial customers continue to recover from the lows of early 2009 and sales from Dongtai Organic, which began generating revenues this quarter
Sales of recycled commodities were $1.2 million, or 28.1% of revenues, compared to $0.4 million, or 25.7% of revenues, in the same period last year, representing an increase of 177.7%. As China's economy continues to recover from the global recession, prices for many raw materials have been increasing gradually, including for Dalian Dongtai's main products, cupric sulfate, iron, plastic and nonferrous metal. To capitalize on this situation, Dalian Dongtai has selectively sold some of its recycled commodities, including commodities that had been inventoried during 2009 due to the then prevailing low sales prices. In addition, Dongtai Organic generated $0.4 million in revenue from the sales of biogas (methane), whereas there was no such revenue in the first quarter of 2009.
Gross profit was $2.7 million compared to $0.9 million in the same period last year, and increase of 202.9%. Gross margin was 65.4% compared to 54.8% in the same period last year. The increase in gross profit margin is primarily attributable to the recovery in the prices of recycled commodities (especially cupric sulfate).
Income from operations was $1.6 million compared to $0.2 million in the prior year period, an increase of 758.9%. Operating margin increased to 38.1% from 11.3% in the prior year period. The increase in operating margin is primarily due to the Company's higher level of sales and operating leverage.
In February 2010, the Company and a consulting firm, which provided business advisory and private placement services to the Company, signed a Settlement and Release Agreement (the "Agreement") to resolve all remaining issues between them. As part of this agreement the Company incurred a one-time non-cash settlement expense during the first quarter of $0.4 million.
Net income was $0.6 million, or $0.04 per diluted share, compared to $0.1 million, or $0.01 per diluted share, in the same period last year. Adjusted net income, excluding the impact of the aforementioned one-time non-cash settlement expense was $1.0 million, or $0.06 per diluted share.
*See the table following this press release for a reconciliation of net income and diluted EPS to exclude the one-time non-cash charge related to the settlement expense.
Financial Condition
As of March 31, 2010, the Company had accounts receivable of $3.1 million compared to $2.0 million as of December 31, 2009. The 54% increase is primarily due to an approximately $0.6 million increase for sludge treatment services rendered and sales of methane and due to the increase in revenue from the Company's industrial solid waste treatment business. As of March 31, 2010, the Company had cash and cash equivalents of $10.3 million compared to $11.4 million as of December 31, 2009. The decrease is mainly due to the repayment of bank loans, and payment for construction and procurement of equipment for Hunan Hanyang and the Dalian Dongtai expansion project. As of March 31, 2010, the Company had a working capital surplus of $1.9 million compared to a surplus of $1.7 million as of December 31, 2009. During the first quarter, operating cash flow was $1.1 million versus negative cash flow from operations of $0.9 million in the prior year period.
Recent Developments
-- In January 2010, the Company received a $3.1 million subsidy from the
PRC government toward the construction of the Hazardous Waste Treatment
Center of Changsha City, Hunan Province. This amount represents the
first installment of a total expected government subsidy of
approximately $16.1 million for this project.
-- In January 2010, in recognition of his contributions to the economy of
Dalian City, a major seaport and industrial center in Northeast China,
the prestigious "Top Ten People in Dalian's Economy" award was bestowed
on Mr. Jinqing Dong, the Company's founder and Chief Executive Officer.
This award has historically been bestowed on leaders in industry,
academia and politics, and include those who play a key role in
Dalian's success as a city that has grown into an important industrial
center. The award was presented by the city's senior officers in
Dalian's Radio and TV Broadcasting Hall.
Business Outlook for 2010
China Industrial Waste Management continues to see evidence of a strong recovery from the recession. The Company's industrial customers are raising their production levels from the lows of last year, prices of recycled commodities are increasing, and the Company expects these trends to continue through the balance of the year.
The Dalian Dongtai expansion project, which is one of 55 hazardous waste treatment centers sponsored by the National Development and Reform Commission and one of two such centers in Liaoning Province, commenced construction at the end of July 2008. The project is over 60% complete and is expected to be operational in the fourth quarter of 2010. Upon completion, Dalian Dongtai's industrial solid waste (hazardous waste) treatment capacity is anticipated to increase to 114,000 tons per annum, or twice its existing capacity.
Dongtai Organic operates the first BOT (Build-Operate-Transfer) plant in the PRC to implement centralized wastewater sludge processing. During the project's 20-year franchised period, this sludge-to-energy plant is expected to dispose of the sludge derived from all sewage treatment plants located in urban Dalian City. This plant has a designed capacity of 600 tons per day and is expected to generate approximately 11,000 cubic meters of methane each day once it reaches its full capacity. There are several sewage treatment plants in Dalian under construction. The Company anticipates that Dalian Organic's facility will reach its full capacity within one or two years following completion of sewage treatment plants in Dalian city. The project has generated revenues since January 2010 from service fees paid by the local government and from sales of biogas (methane) to Dalian Gas Company. The Company expects Dongtai Organic to be an increasingly important contributor to the Company's financial performance in 2010.
For the second quarter of 2010, the Company expects revenues of between $4 million and $4.5 million and net income of between $1.0 million and $1.2 million. For full year 2010, the Company continues to expect revenues of between $15.0 million and $18.0 million and net income of between $4.5 million and $4.8 million.
Mr. Dong added, "We are optimistic about our business prospects going forward. Our customers have returned to healthy production volumes and we see this trend continuing. We are also starting to benefit from the investments we made in expanding into sludge treatment via our Dongtai Organic BOT plant which is now starting to ramp up and will account for a growing percentage of our revenues going forward. Come the fourth quarter, our Dongtai Expansion project is expected to come online and begin contributing to our financial results. Overall, we believe we are well positioned to capitalize on the growing market for industrial waste treatment in China and look forward to delivering continued strong results for our shareholders."
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time on Thursday, May 13, 2010, to discuss its financial results for the first quarter of 2010.
To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (877) 331 - 5105. International callers should dial +1 (631) 865 - 5293. The Conference Pass Code is 73236106.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Thursday, May 13, 2010, at 10:00 a.m. Eastern Time. To access the replay, call (800) 642-1687. International callers should call +1 (706) 645-9291. The Conference Pass Code is 73236106.
The Second Annual CCG China Rising Investment Conference
The Company will present at the upcoming Second Annual China Rising Investment Conference hosted by CCG Investor Relations in New York, NY on May 17, 2010.
The date, time and location of CIWT's presentation are as follows:
Event: Second Annual CCG China Rising Investment Conference
Date: May 17, 2010
Time: 9:30 a.m. ET
Venue: The Carnegie Room
Grand Hyatt New York
109 East 42nd Street
New York, NY 10017
The Second Annual China Rising Investment Conference hosted by CCG Investor Relations will provide over 300 fund managers and investors access to senior management of a wide range of Chinese growth companies in sectors including consumer staples, agriculture, pharmaceuticals, infrastructure, information technology, advanced materials, capital goods, and alternative energy. The conference will include over 30 U.S.-listed Chinese companies and a number of private companies.
Interested parties and investors may find more information for the conference by visiting the following website: http://www.chinarisingcosnference.com .
Use of Adjusted Financial Measures
GAAP results for the three months ended March 31, 2010 include a one-time non-cash charge related to the Company's settlement expense. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of this item in this release. It is a departure of U.S. GAAP, however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(UNAUDITED)
For the Three Months Ended March 31,
2010 2009
Revenues
Service fees $2,944,558 $1,197,699
Sales of recycled commodities 1,150,283 414,251
Total revenues 4,094,841 1,611,950
Cost of revenues
Cost of service fees 1,028,493 470,163
Cost of recycled commodities 388,459 257,687
Total cost of revenues 1,416,952 727,850
Gross profit 2,677,890 884,100
Operating expenses
Selling expenses 151,624 177,315
General and administrative expenses 968,094 525,371
Total operating expenses 1,119,718 702,686
Income from operations 1,558,172 181,414
Other income (expense)
Other income 7,167 14,675
Other expense (228,323) (63,841)
Settlement expense (439,821) --
Total other income (expense) (660,977) (49,166)
Net income before tax provision
Tax provision 133,001 45,029
Net income 87,220
764,194
Net income attributable
to the noncontrolling
interest 155,339 (29,784)
Net income attributable
to the Company $608,855 $117,003
Foreign currency translation
adjustment 1,532 (16,302)
Comprehensive income
attributable to the Company 610,387 100,701
Comprehensive income attributable
to the noncontrolling interest 155,339 (29,784)
Comprehensive income $765,726 $70,918
Basic and diluted weighted
average shares outstanding
Basic 15,327,507 15,262,035
Diluted 16,401,437 15,262,035
Basic and diluted net
earnings per share
Basic $0.04 $0.01
Diluted $0.04 $0.01
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED BALANCE SHEETS
March 31, 2010 December 31,
2009
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $10,311,215 $11,419,129
Notes receivable 256,462 335,780
Accounts receivable, net 3,113,248 2,021,421
Construction reimbursement
receivable 106,728 846,270
Other receivables 61,794 91,872
Inventories 2,392,768 2,085,029
Advances to suppliers 654,558 800,694
Deferred expense 19,793 14,650
Total current assets 16,916,566 17,614,845
Long-term equity investment
87,903 87,900
Property, plant and
equipment, net 31,894,224 32,319,145
Construction in progress 9,924,250 9,123,927
Land usage right, net of 1,983,332 1,994,394
accumulated amortization
BOT franchise right 4,102,083 4,102,023
Certificate of deposit 293,006 293,002
Restricted cash 3,104,627 96,707
Other asset 1,204,761 1,074,531
Deferred tax asset 385,951 377,381
Related party receivable 234,405 234,401
TOTAL ASSETS $70,131,108 $67,318,256
LIABILITIES
Current liabilities
Accounts payable $673,656 $418,435
Short-term loan 6,739,137 6,739,038
Tax payable 398,810 200,957
Advance from customers 561,392 544,125
Deferred sales 724,766 958,930
Accrued expenses 29,488 301,531
Construction projects payable 3,119,419 3,932,297
Other payable 116,710 235,211
Long-term loan-current portion 2,245,158 2,245,125
Related party payable 380,908 380,902
Total current liabilities 14,989,444 15,956,551
Long-term loan 13,194,424 13,755,512
Asset retirement obligation 619,611 610,445
Government subsidy 5,533,509 2,464,079
TOTAL LIABILITIES 34,336,988 32,786,587
EQUITY
Stockholders' equity of the
Company
Preferred stock: par value
$.001; 5,000,000 shares
authorized; none issued
and outstanding -- --
Common stock: par value
$.001; 95,000,000 shares
authorized; 15,336,535 and
15,274,035 shares issued
and outstanding as of
March 31, 2010 and
December 31, 2009,
respectively 15,337 15,274
Additional paid-in
capital 7,602,626 7,162,867
Deferred stock-based compensation (826,478) (884,139)
Accumulated other comprehensive
income 2,327,824 2,326,292
Retained earnings 18,099,775 17,490,919
Total stockholders' equity of
the Company 27,219,084 26,111,213
Noncontrolling interest 8,575,036 8,420,456
TOTAL EQUITY 35,794,120 34,531,669
TOTAL LIABILITIES AND EQUITY $70,131,108 $67,318,256
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months ended March 31,
2010 2009
Cash flows from operating
activities:
Net income attributable to the
Company $608,855 $117,003
Adjustments to reconcile net
income to net cash
provided by operating activities:
Noncontrolling interest 155,339 (29,784)
Depreciation 526,771 264,575
Amortization 15,837 13,334
Amortization of deferred
stock-based compensation 57,661 --
Bad debt allowance 35,547 --
Stock and warrant issued
for settlement 439,821 --
Accretion expenses 9,155 9,023
Government subsidy recognized
as income (7,167) --
Changes in operating assets and
liabilities:
Notes receivable 79,307 --
Accounts receivable (1,091,651) (433,130)
Construction reimbursement
receivable 703,933 --
Other receivables 30,073 15,744
Inventories (307,645) (172,530)
Advance to suppliers 146,118 (146,727)
Deferred expense (5,142) 731
Other asset (128,064) (82,855)
Deferred tax assets (8,562) --
Accounts payable 255,163 (132,754)
Tax payable 197,810 (110,180)
Advance from customers 17,256 10,104
Accrued expense (390,470) (334,615)
Deferred income (234,131) 101,315
Net cash provided by (used in)
operating activities 1,105,814 (910,746)
Cash flows from investing
activities
Purchase of property and
equipment (101,464) (98,532)
Construction in progress (726,790) (3,022,054)
Purchase of intangible
assets (6,871) --
Certificate of deposit
-- (804,564)
Net cash used in investing
activities (835,125) (3,925,150)
Cash flows from financing
activities
Repayment of construction
project payable (812,769) (886,924)
Repayment of short-term
loans -- (1,901,697)
Proceeds from long-term loan -- 6,202,458
Repayment of long-term loans (561,174) --
Proceeds from related party loan -- 102,399
Net cash provided by (used in)
financing activities (1,373,943) 3,516,236
Effect of exchange rate on cash (4,660) (3,322)
Net decrease in cash and cash
equivalents (1,107,914) (1,322,982)
Cash and cash equivalents,
beginning of period 11,419,129 5,710,784
Cash and cash equivalents, end
of period $10,311,215 $4,387,802
Supplemental cash flow
information:
Cash paid during the year for:
Interest $347,272 $94,545
Income taxes $87,884 $43,518
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended March 31,
Adjusted Net Income and
Diluted EPS 2010 2009
GAAP Net Income $608,855 $117,003
Settlement Expense $(439,821) $--
Adjusted Amount Net Income $1,048,676 $117,003
Weighted average number of
shares - Diluted 16,401,437 15,262,035
Adjusted Diluted EPS $0.06 $0.01
About China Industrial Waste Management, Inc.
China Industrial Waste Management, Inc. is engaged in the collection, treatment, disposal and recycling of industrial wastes principally in Dalian and surrounding areas in Liaoning Province, People's Republic of China through its 90%-owned subsidiary Dalian Dongtai Industrial Waste Treatment Co., Ltd. ("Dalian Dongtai") and other indirect subsidiaries. Dalian Dongtai treats, disposes of and/or recycles many types of industrial wastes, and recycled waste products used by customers as raw material to produce chemical and metallurgy products. In addition, Dalian Dongtai treats or disposes of industrial waste through incineration, burial or water treatment, and provides environmental protection services, technology consultation, pollution treatment services, waste management design processing services, waste disposal solutions, waste transportation services, onsite waste management services, and environmental pollution remediation services. For more information, please visit the Company's website (http://www.chinaciwt.com ).
Cautionary Statement Regarding Forward-Looking Information
This release may include "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain such words as "may," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or the negative or other variations thereof or comparable terminology. These forward-looking statements are based on current expectations and projections about future events. Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, our actual performance may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission: the timing and magnitude of technological advances; the prospects for future acquisitions; the effects of political, economic and social uncertainties regarding the governmental, economic and political circumstances in the People's Republic of China, the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel; our projected sales, profitability, and cash flows; our growth strategies; anticipated trends in our industries; our future financing plans; and our anticipated needs for working capital. Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
For more information, please contact:
Company Contact:
Ms. Guo Xin, Chief Financial Officer
Tel: +86-411-8581-1229
Email: hellenguo@chinaciwt.com
Mr. Zhang Dazhi, Director of Investor Relations
Tel: +86-411-8259-5339
Email: darcy.zhang@chinaciwt.com
Web: http://www.chinaciwt.com
CCG Investor Relations:
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: athan.dounis@ccgir.com
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
