RINO International Corp. Announces First Quarter 2010 Financial Results -- First Quarter Net Sales Increased 34.4% to $47.9 Million; Adjusted Net Income $8.5 Million; Adjusted EPS of $0.30

-- On March 31, 2010, Cash and Cash Equivalents totaled $97.7 Million

-- Backlog on March 31, 2010 was Approximately $110.5 Million

-- Management to Host Earnings Conference Call Monday May 17, 2009 at 9:00 a.m. ET

DALIAN, China, May 17 /PRNewswire-Asia-FirstCall/ -- RINO International Corp. (Nasdaq: RINO), which through its subsidiaries and controlled affiliates (collectively, the "Company" or "RINO"), designs, manufactures, installs and services proprietary and patented wastewater treatment, desulphurization equipment, and high temperature anti-oxidation systems for iron and steel manufacturers in the People's Republic of China ("PRC"), today announced the Company's financial results for the first quarter of 2010.


    Summary Financials

    First Quarter Results (Unaudited)

                               Q1 2010            Q1 2009         CHANGE
    Sales                   $47.9 million      $35.6 million      + 34.4%
    Gross Profit            $16.7 million      $16.0 million       + 4.7%
    Provision for Income
     Taxes                   $1.5 million(1)             N/A
    GAAP Net Income         $18.7 million      $12.5 million      + 49.6%
    Adjusted Net Income      $8.5 million(2)   $12.5 million(3)   - 31.8%
    GAAP EPS (Diluted)              $0.65              $0.50      + 30.0%
    Adjusted EPS (Diluted)          $0.30(2)           $0.50(3)   - 40.0%

    (1) The Company's effective tax rate for 2010 is 7.3% and created a
        provision of $1.5 million, or $.05 per share for Q1 2010 vs. none in
        the same period in 2009.
    (2) Excludes non-cash gain of $10.2 million related to the change in fair
        value of warrants and non-cash charge of $19,496 for stock
        compensation expense.
    (3) Excludes non-cash gain of $23,611 related to the change in fair value
        of warrants.

2010 First Quarter Financial Results

Net revenues for the first quarter ended March 31, 2010 increased 34.4% to $47.9 million as compared to $35.6 million for the first quarter in 2009. Revenue growth was driven by continued growth in demand across its three major product lines. Specifically, the Company recorded $33.9 million in desulphurization revenues, an increase of 32.0% from $25.7 million in same period 2009, with $4.8 million related to the Huanan Lianyuan DXT project; $10.8 million in wastewater treatment system sales, an increase of 49.1% over the first quarter in 2009; and $3.0 million in anti-oxidation equipment and coatings as compared to $2.4 million recorded in the same period in 2009.

Cost of sales for the first quarter of 2010 was $31.2 million as compared to $19.7 million in same period 2009, an increase of 58.5%. Gross profit was $16.7 million in the first quarter of 2010 as compared to $16.0 million for the same period in 2009, an increase of $0.7 million or 4.7%, representing gross margins of approximately 34.9% and 44.8%, respectively. The decrease in gross margins was due to increased steel costs, in addition to higher levels of outsourced production during the first quarter to meet project implementation timelines. The Company incurred $5.8 million in outsourcing expense for the three months ended March 31, 2010 as compared to $0.9 million in the same period in 2009.

Total operating expenses for the first quarter of 2010 were $6.8 million as compared to $3.4 million for the same period in 2009. The increase in operating expenses was primarily due to increased sales commissions associated with larger contracts. Operating margins were 20.6% for the first quarter of 2010 as compared to 35.3% for the first quarter of 2009.

The Company's effective tax rate for 2010 is 7.3%, resulting in a provision of $1.5 million, or $.05 per share, for the first quarter of 2010, compared to none in the same period in 2009.

GAAP net income for the first quarter of 2010 was $18.7 million, representing an increase of 49.6% as compared to $12.5 million reported in the same period in the prior year. GAAP earnings were $0.65 per diluted share for the first quarter of 2010 as compared to $0.50 per diluted share for the same period last year, based on 28.6 million and 25.0 million weighted average shares outstanding, respectively. Excluding a $10.2 million gain for the change in the fair value of warrants and $19,496 stock compensation expense for the first quarter of 2010, adjusted net income (Non-GAAP) was $8.5 million, with adjusted earnings per diluted share of $0.30.

"During the first quarter of 2010, we delivered measured revenue growth through the execution of several major projects, including both desulphurization and wastewater treatment systems," commented Mr. Zou Dejun, President and CEO of RINO International. "We are pleased with the momentum in our business as evidenced by our backlog and expect a robust second half of the year as the State Environmental Protection Agency (SEPA) maintains a supportive policy to reduce the sulphur emissions for iron and steel producers, while aging wastewater infrastructure systems force prospective customers to accelerate purchase decisions. We are confident in meeting our projects for $225 million in revenue for 2010, representing 17% growth over 2009.

Increased demand for company resources, coupled with capacity constraints led to more outsourcing during the first quarter which compressed margins, but our prudent cost management kept gross margins within the Company's target of 35% to 40%. In addition, RINO incurred significantly higher sales commissions due to a larger number of contracts and higher associated fees due to higher average contract price. Construction commenced on a new large scale industrial production facility on the 57.5 acres we recently secured in Dalian Changxing Island Harbor Industrial Zone. This facility will be used to expand the Company's manufacturing capacity by over 300% and R&D capabilities for our entire line of environmental protection equipment and is expected to come on-line in phases commencing September 2010 and to be completed by May 2011.

During the first quarter, we began the installation for the Company's first BOT desulphurization project with Shougang Jingtang Steel Company, continued the DXT desulphurization system installation for Hunan Lianyuan Iron and Steel Company and commenced construction of the sludge treatment facility for the city of Dalian."

"With the proceeds from the $100 million equity financing in December, we have the necessary working capital to expand our production capacity while leveraging incremental working capital to secure additional projects as demand continues to be driven by environmental and regulatory trends and economic growth in China," Mr. Zou concluded.

Balance Sheet and Cash Flow Discussion

Cash and cash equivalents as of March 31, 2010 were $97.7 million, representing a decrease of 27.4% as compared to $134.5 million as of December 31, 2009. At the end of the quarter the Company had working capital of 231.8 million and a current ratio of 7.1 to 1. Accounts receivable stood at $52.3 million, a 9.6% decrease from $57.8 million reported as of December 31, 2009. Days sales outstanding stood at 105 compared to 104 at the end of last year. As of March 31, 2010, the Company had $8.1 million in long-term loans and $3.7 million in short term loans. Stockholder's equity increased 9.2% to $223.0 million as of March 31, 2010 as compared to $204.2 million as of December 31, 2009.

For the first quarter in 2010, cash used in operations totaled $38.2 million as compared to $27.6 million cash provided by operations for the first quarter in 2009, which was mainly due to an increase in advances for inventory purchases to support additional projects and an increase in costs and estimated earnings in excess of billings on uncompleted contracts.

Backlog as of March 31, 2010

Backlog, defined as unfinished projects, as of March 31, 2010 was $110.5 million with the breakdown detailed in the table below. The Company expects that 50% of this will turn into revenue by the end of the second quarter.


    Product Segment                               Amount ($ millions)
    1.  Desulphurization Systems                         67.7
    2.  Wastewater Treatment                             22.3
    3.  Anti-oxidation Systems                            1.8
    4.  Municipal Sludge Treatment                       18.7
    Total                                               110.5


    Recent Events
    -- On May 10 Mr. Zou and Ms. Qiu repaid the $3.5 million short-term loan
       plus interest which was made on March 31, 2010.
    -- On May 3 the Company appointed Mr. Ben Wang as Chief Financial Officer
       and Mr. Harold Epps as Chief Strategic Officer to assist with the
       international growth plan.

Conference Call

The Company will host a conference call on May 17, 2010, at 9:00 a.m. ET. To attend the call, please use the dial information below. When prompted, ask for the "RINO International Call" and/or be prepared to provide the conference ID.

    Date:                           May 17, 2010
    Time:                           9:00am ET
    Conference Line Dial-In (U.S.): +1-888-846-5003
    International Dial-In:          +1-480-629-9856
    Conference ID:                  4302354
    Webcast link:                   http://viavid.net/dce.aspx?sid=00007583

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through May 24th, 2009. To listen, please call +1-800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 4302354 for the replay.

About RINO International Corporation

RINO International Corporation, through its direct and indirect subsidiaries, including Innomind Group Limited and Dalian Innomind Environment Engineering Co., Ltd., its contractually-controlled affiliate, Dalian RINO Environmental Engineering Science and Technology Co., Ltd. ("Dalian Rino") and Dalian Rino's wholly-owned subsidiaries, Dalian Rino Environmental Engineering Project Design Co., Ltd. and Dalian Rino Environmental Construction & Installation Project Co., Ltd., is a leading provider of environmental protection equipment for the iron and steel industry in China. Specifically, RINO designs, manufactures, installs and services proprietary and patented wastewater treatment, flue gas desulphurization equipment, and high temperature anti-oxidation systems, which are all designed to reduce either industrial pollution and/or improve energy utilization. RINO's manufacturing facility maintains the ISO 9001 Quality Management System and ISO 14001 Environment Management System certifications, in addition to receiving numerous government and industry awards.

Additional information about the Company is available at the Company's website: http://www.rinogroup.com .

Cautionary Statement Regarding Forward-Looking Information

Certain statement in this press release may contain forward-looking information about the Company. 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 statements which may include discussions of strategy, and statements about industry trends future performance, operations and products of each of the entities referred to above. Actual performance results may vary significantly from expectations and projections as a result of various factors, including without limitation and the risks set forth "Risk Factors" contained in the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP net income, and non-GAAP EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results," meaning our operating performance excluding not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    The following table provides the non-GAAP financial measure and the
related GAAP measure and provides a reconciliation of the non-GAAP measure to
the equivalent GAAP measure.


                                              Q1 2010              Q1 2009
    GAAP Net Income                         $18,656,506          $12,474,916
    Stock compensation expense                  $19,496                   --
    Change in fair value of warrants       $(10,185,796)            $(23,611)
    Adjusted Net Income                      $8,490,206          $12,451,305
    Adjusted EPS (Diluted)                        $0.30                $0.50


    For more information, please contact:

    For the Company:
     Ben Wang
     Tel:   +86-411-8766-2700
     Email: benwang@rinogroup.com

     Harold Epps
     Tel:   +1-949-888-6630
     Email: harold.epps@rinogroup.com

    Investors:
     Matt Hayden
     HC International, Inc.
     Tel:   +1-561-245-5155
     Email: matt.hayden@hcinternational.net


                         Financial Statements Follow

               RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                  AS OF MARCH 31, 2010 AND DECEMBER 31, 2009

                                                  2010            2009
                                              (UNAUDITED)
                                    ASSETS

    CURRENT ASSETS
    Cash and cash equivalents                 $97,659,037     $134,487,611
    Restricted cash                             3,806,131               --
    Notes receivable                              539,929          440,100
    Loan to shareholders                        3,074,748        3,005,386
    Accounts receivable, trade, net of
     allowance for doubtful accounts of
     $477,303 and $273,446 as of March
     31, 2010 and December 31, 2009,
     respectively                              52,257,896       57,811,171
    Costs and estimated earnings in excess
     of billings on uncompleted contracts      24,417,688        3,258,806
    Inventories                                 2,217,412        5,405,866
    Advances for inventory purchases           84,358,237       34,056,231
    Other current assets and prepaid
     expenses                                   1,457,815          629,506
    Total current assets                      269,788,893      239,094,677

    PLANT AND EQUIPMENT, NET                   12,881,407       12,265,389

    OTHER ASSETS
    Investment in unconsolidated affiliate        440,100               --
    Advances for non current assets            14,257,458        6,570,378
    Intangible assets, net                      1,131,759        1,144,796
    Total other assets                         15,829,317        7,715,174

    Total assets                             $298,499,617     $259,075,240

                      LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
    Accounts payable                            $10,894,287      $4,281,353
    Short term bank loans                         3,667,500       1,467,000
    Notes payable                                 3,806,131              --
    Billings in excess of costs and estimated
     earnings on uncompleted contracts            5,499,543              --
    Customer deposits                             5,587,565       4,984,801
    Liquidated damages payable                       20,147          20,147
    Taxes payable                                 8,048,485       4,003,709
    Other payables and accrued liabilities          461,686         496,411
    Total current liabilities                    37,985,344      15,253,421

    Long-term loan                                8,068,500              --

    Warrant Liabilities                           4,986,916      15,172,712

    REDEEMABLE COMMON STOCK ($0.0001 par
     value, 5,464,357 shares issued with
     conditions for redemption outside
     the control of the company)                 24,480,319      24,480,319

    COMMITMENTS AND CONTINGENCIES

    SHAREHOLDERS' EQUITY
    Preferred Stock ($0.0001 par value,
     50,000,000 shares authorized, none
     issued and outstanding)                             --              --
    Common Stock ($0.0001 par value,
     10,000,000,000 shares authorized,
     28,603,321 shares issued and
     outstanding as of March 31, 2010
     and December 31, 2009)                           2,860           2,860
    Additional paid-in capital                  107,155,089     107,135,593
    Retained earnings                            96,760,779      78,983,794
    Statutory reserves                           12,634,833      11,755,312
    Accumulated other comprehensive income        6,424,977       6,291,229
    Total shareholders' equity                  222,978,538     204,168,788
    Total liabilities and shareholders' equity $298,499,617    $259,075,240



               RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)
              FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
                                 (UNAUDITED)


                                                  2010              2009
    REVENUES
    Contracts                                 $47,767,567       $35,366,136
    Services                                       91,680           241,983
                                               47,859,247        35,608,119

    COST OF SALES
    Contracts                                  30,975,052        19,125,496
    Services                                           --           323,918
    Depreciation                                  184,675           208,067
                                               31,159,727        19,657,481

    GROSS PROFIT                               16,699,520        15,950,638

    OPERATING EXPENSES
    Selling, general and administrative
     expenses                                   6,812,674         3,370,724
    Stock compensation expense                     19,496                --
    TOTAL OPERATING EXPENSES                    6,832,170         3,370,724

    INCOME FROM OPERATIONS                      9,867,350        12,579,914

    OTHER INCOME (EXPENSES), NET
    Other expense, net                             (3,215)           (9,650)
    Change in fair value of warrants           10,185,796            23,611
    Interest income (expense), net                 70,282          (118,959)
    TOTAL OTHER INCOME (EXPENSES), NET         10,252,863          (104,998)

    INCOME BEFORE PROVISION FOR INCOME
     TAXES                                     20,120,213        12,474,916

    PROVISION FOR INCOME TAXES                  1,463,707                --

    NET INCOME                                 18,656,506        12,474,916

    OTHER COMPREHENSIVE INCOME (LOSS):
    Foreign currency translation adjustment       133,748          (127,620)

    COMPREHENSIVE INCOME                      $18,790,254       $12,347,296

    WEIGHTED AVERAGE NUMBER OF SHARES:
    Basic                                      28,603,321        25,040,000
    Diluted                                    28,603,321        25,040,000

    EARNINGS PER SHARE:
    Basic                                           $0.65             $0.50
    Diluted                                         $0.65             $0.50



               RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
                                 (UNAUDITED)

                                                   2010            2009

    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                 $18,656,506     $12,474,916
    Adjustments to reconcile net income to
     cash (used in) provided by operating
     activities:
    Depreciation                                   226,768         256,334
    Amortization                                    13,033          16,682
    Allowance for bad debt                         203,788              --
    Imputed interest on advances from
     shareholders                                       --           5,375
    Amortization of long term prepaid
     expenses                                       19,577           3,663
    Stock compensation expense and shares
     placed in escrow                               19,496              --
    Change in fair value of warrants           (10,185,796)        (23,611)
    Changes in operating assets and
     liabilities:
    Notes receivable                               (99,795)       (325,709)
    Accounts receivable                          5,347,594      12,355,675
    Costs and estimated earnings in excess
     of billings on uncompleted contracts       (21,151,670)            --
    Inventories                                  3,187,367        (114,388)
    Advances for inventory purchases           (50,284,861)     (3,311,177)
    Other current assets and prepaid
     expenses                                     (828,027)        (47,284)
    Accounts payable                             6,610,680      (2,570,517)
    Billings in excess of costs and
     estimated earnings on uncompleted
     contracts                                   5,497,669              --
    Customer deposits                              602,559       6,272,826
    Taxes payable                                4,043,397       2,915,291
    Other payables and accrued liabilities         (34,713)       (337,742)
    Net cash (used in) provided by
     operating activities                      (38,156,428)     27,570,334

    CASH FLOWS FROM INVESTING ACTIVITIES
    Payment for investment in
     unconsolidated affiliate                     (440,100)             --
    Purchase of equipment                         (822,503)        (20,789)
    Advances for non current assets             (7,704,037)             --
    Net cash used in investing activities       (8,966,640)        (20,789)

    CASH FLOWS FROM FINANCING ACTIVITIES
    Change in restricted cash                   (3,804,834)      1,030,317
    Proceeds from notes payable - banks          3,804,834              --
    Proceeds from short-term bank loans          2,199,750              --
    Proceeds from long-term loan                 8,065,750              --
    Payment to shareholders                       (291,234)       (380,650)
    Proceeds from shareholder                      221,844              --
    Net cash provided by financing
     activities                                 10,196,110         649,667

    EFFECT OF EXCHANGE RATE ON CASH                 98,384         (28,747)

    (DECREASE) INCREASE IN CASH AND CASH
     EQUIVALENTS                               (36,828,574)     28,170,465

    CASH AND CASH EQUIVALENTS, beginning       134,487,611      19,741,982

    CASH AND CASH EQUIVALENTS, ending          $97,659,037     $47,912,447

    SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION
    Cash paid for Interest expense                 $19,468        $111,509
    Cash paid for income taxes                     $73,256        $203,016

SOURCE RINO International Corp.



RELATED LINKS
http://www.rinogroup.com
http://viavid.net/dce.aspx?sid=00007583

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