Tri-Tech Holding Q2'10 Revenue Up 157.8% to $8.1M; Net Income Up 66.9% to $1.4M; First Six Months Revenue Up 105.9% to $12.3M; EPS $0.34
Conference Call August 16, 2010 at 9:00 AM EDT
BEIJING, Aug. 13 /PRNewswire-Asia-FirstCall/ -- Tri-Tech Holding Inc. (Nasdaq: TRIT), a leading total solutions provider to China's water resources, municipal wastewater and industrial pollution control markets, announced today that revenue for the second fiscal quarter ended June 30, 2010 increased 157.8% to $8.1 million from $3.1 million in Q2' 2009. Net income for the quarter was $1.4M or $0.19 per diluted share compared with net income of $0.8M or $0.24 diluted EPS in Q2' 2009.
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Additional Second Quarter 2010 Highlights
-- Revenue from Water/Wastewater Treatment and Municipal Infrastructure
operations increased 190.4% to $4.3 million
-- Revenue from Water Resource Management Systems and Engineering Services
increased 22.2% to $2.1 million
-- Revenue from Industrial Pollution Control and Safety was $1.8 million
compared with $60,643 in the first quarter of 2010, a sequential gain
of 2,964%
-- Gross profit (exclusive of depreciation and amortization) increased
117.9% to $3 million from $1.4 million in Q2'2009
-- Gross margin decreased to 37% compared to 43.9% for Q2'2009.
-- Income from operations increased 92.9% to $1.8M from $0.9M in Q2'2009.
-- Weighted average number of diluted shares outstanding was 7.41 million,
compared to 3.56 million as of June 30, 2009
-- Appointed Bernstein & Pinchuk LLP to serve as the company's independent
auditing firm
-- Set up a wholly-owned subsidiary in the U.S. and a joint venture in
India; Established a new research and development base in Tianjin
-- Engaged Friedman LLP to assist the company in implementing
Sarbanes-Oxley 404
Subsequent Event
On August 6, 2010, the company completed its first acquisition of 100% equity ownership of Beijing Satellite Science & Technology Co. (BSST), a total solution provider in industrial pollution control and production process safety fields, for total consideration of $3.8 million.
Second Quarter 2010 Financial Performance
Revenue
Revenue was $8.1 million in the quarter ended June 30, 2010, an increase of $5 million, or 157.8%, compared to revenue of $3.1 million in the same period of 2009. This reflected increases in the number and size of new contractual engagements. During the quarter, the company was awarded several contracts with sales exceeding $2.6 million (equal to RMB 18 million). For Water/Wastewater Treatment and Municipal Infrastructure, revenue was $4.3 million, an increase of 2.8 million or 190.4%, compared to $1.5 million in Q2'2009. Revenue from Water Resources Management Systems and Engineering Services saw a 22.2% increase to $2.1 million from $1.7 million in Q2'2009. Revenue from Industrial Pollution Control and Safety was $1.8 million, an increase of 2,964% from last quarter.
Net Income
Net income attributable to the shareholders of TRIT was $1.4 million, an increase of $569,905, or 66.9%, compared to net income attributable to the shareholders of TRIT of $851,682 in the same period of 2009.
EPS
Diluted EPS was $0.19 based on net income of $1.4 million and diluted shares outstanding of 7.41 million as of June 30, 2010. This compares with net income of $851,682 or $0.24 diluted EPS based on diluted shares outstanding of 3.56 million in Q2'2009.
Gross profit
Gross profit (exclusive of depreciation and amortization) increased 117.9% to $3 million for the quarter from 1.4 million in Q2'2009. This increase reflected an increased number of contracts.
Gross margin
Gross margin (exclusive of depreciation and amortization) for the quarter decreased to 37% compared to 43.9% for the same quarter in 2009. This was because the increased rate in cost of revenue (exclusive of depreciation and amortization) was greater than the increase rate in revenue, which resulted from a decline in the proportion of revenue of high-gross margin software sales and an increase in the proportion of revenue of low-gross-margin hardware sales and EPC.
Operating income
Operating income increased 92.9% to $1.8 million from $0.9 million in Q2'2009. Operating margin was 21.9%, compared to 29% in Q2'2009. Operating expenses for the quarter were $1.2 million, an increase of $771,764, or 167.7%, compared to operating expenses of $460,079 in the same period of 2009. The significant increase in operating expenses mainly reflected the rapid growth rate of general and administrative and selling expenses.
Liquidity and Capital Resources
As of June 30, 2010, cash and cash equivalents were $31.6 million, including a U.S. dollar deposit of $9 million and an equivalent RMB deposit of $22.6 million. As of June 30, 2010, working capital was $50.6 million.
Six months 2010 Financial Performance
Revenue for the first six months ended June 30, 2010 was $12.3 million, an increase of $6.3 million, or 105.9%, compared to revenue of $6 million in the same period of 2009. In the six months ended June 30, 2010, net income attributable to the shareholders of TRIT was up 54.2% to $2.2 million, compared with $1.5 million for the first six months of 2009. Diluted EPS was $0.34 compared to $0.41 for the same period of 2009.
Order Backlog
As of August 13, 2010, the company had a total backlog of $20.9 million, including $15 million in municipal water and wastewater services, $1.1 million in water resources services and $4.8 million in industrial sector services.
Updated 2010 Outlook
For 2010, the company reaffirms its previously announced guidance that revenues will range between $40.6 million and $50.5 million. Net income is expected to reach between $7 million and $9.2 million. These are the company's targets, not predictions of actual performance. The foregoing statements regarding targets are forward-looking and actual results may differ materially.
Management Comment
Chief Executive Officer Warren Zhao said, "Strong results from our Water/Wastewater Treatment and Municipal Infrastructure, Water Resources, Management Systems and Engineering Services and our newly formed Industrial Pollution Control and Safety business segments have provided a solid foundation toward meeting our performance expectations for the year. We have a large pipeline of projects as well as increasing opportunities for new business.
"As a result of our successful capital raise, our company is financially strong enough to execute our plans with over $31 million in cash and working capital of over $50 million.
Comments on Three Operating Segments
Water/Wastewater Treatment and Municipal Infrastructure
"We had a record quarter in our Water/Wastewater Treatment and Municipal Infrastructure business, our largest operating segment. Subsequently, we have expanded the geographical footprint of our municipal wastewater business from our current base of operations in Tianjin and Hebei Province to Hubei, Inner Mongolia, Xinjiang, Shaanxi, Sichuan and Heilongjiang provinces. To facilitate this, we established a branch office in Wuhan, the capital of Hubei Province. We are also preparing to set up sales offices in Chengdu in Sichuan Province and Harbin in Heilongjiang Province and project offices in Xi'an in Shaanxi Province, Ordos in Inner Mongolia Autonomous Region and Urumqi in the Xinjiang Uygur Autonomous Region.
"Our expansion activities have already produced results. After months of effort, we successfully won the bid for a $6 million project to upgrade and expand a wastewater treatment plant in Kuitun City of Xinjiang Uygur Autonomous Region. This project is financed by a Japanese Yen credit under an agreement between China's Ministry of Finance and Japan's Bank for International Cooperation. Winning our first project funded by a foreign government financial institution indicates Tri-Tech has reached a new level and has the capability of competing and winning high-end projects.
"The potential going forward is quite large. For instance, we have also identified $35 million in project leads within the provinces that we recently expanded. But, in fact, we expect to secure significant contracts in all of our newly expanded provinces in 2010. Due to a shortage of fresh water sources, the Chinese government now requires all new power plants in coastal areas to build seawater desalination plants to provide the process water to operate the power plants as well as provide water for adjacent commercial and residential users. As a result, the seawater desalination market is growing rapidly, especially in the Bohai Bay Area that is surrounded by the major cities of Tianjin, Tangshan, Dalian and Qinhuangdao. By the end of 2010, the total capacity of sea water desalination will increase to 500,000 cubic meters per day or 150 million cubic meters a year, becoming the largest sea water desalination industrial base in China. We expect to participate in this potential market by leveraging our existing technologies in water treatment.
Water Resources Management and Engineering Services
"In our water resources management and engineering services segment, we continued to see enormous opportunities in flood and torrent control. Recent media reports of torrent related disasters and severe drought in the southern provinces in China underscore the government's commitment to expand its national drought and flood control command system and mountain torrent forecasting projects. RMB1.14 billion is being allocated to the National Drought and Flood Control Command System (phase II) projects by the central government and local governments. We expect funding for these projects to commence in the third quarter of this year after flood season. The central government has acknowledged the effectiveness of torrent pilot control projects in 103 counties and has now mandated expansion beyond the pilot areas. We participated in such pilot projects in 17 of those 103 counties. Currently the China's Ministry of Water Conservancy (MWC) is deploying a new phase that will cover 200 to 300 counties with central and local investment totaling RMB900 million.
"We expect additional business opportunities in water quantity and quality monitoring, water quality labs and portable testing devices in conjunction with substantial spending allocated in this sector as the MWC initiates building 98 hydrological experiment stations with spending of RMB490 million in non-structural measures for flood control in the Eleventh-Five-Year Plan.
Industrial Pollution Control and Safety
"In our newly reportable segment, Industrial Pollution Control and Safety, during the second quarter, we completed several projects including a turnkey air pollution control project for Interface production facilities in Taicang, Jiangsu Province. Interface is an Atlanta based company that is a worldwide leader in design, production and sales of environmentally responsible modular carpet. We are actively pursuing several other large projects in this segment with various petrochemical companies, including a wastewater treatment project for Daqing Refining & Chemical Company, a biofiltration odor control system for Daqing Petrochemical Co. and a VOC abatement Phase II project for a Rubber Plant of the Yanshan Petrochemical Co. We believe our acquisition of BSST provides us with the strategic ability to penetrate the industrial pollution control market in various large industries, especially production automation and safety in the petroleum and petrochemical industry.
Research and development
"We continued to invest heavily in research and development in support of our various initiatives including new products and advanced treatment processes. We established a new R&D base, Tianjin Baoding Environmental Technology Ltd. (Tianjin Baoding), in the Tianjin Baodi Economic Development Area. As the R&D base for Tri-Tech, Tianjin Baoding will focus on research and development, pilot testing, pre-installation and pre-assembly and manufacturing of the company's proprietary products.
"In addition, we have established cooperative relationships with several companies in the United States and Europe with innovative technologies. The technologies we are pursuing include MBR membrane technology, forward osmosis membrane, the latest ecological engineering for wastewater treatment, advanced solid-liquid separation technology and energy saving mixers in anaerobic, aerobic and anoxic cells. We invested significant resources to develop a large-scale water resources management software platform to consolidate our current independent, specialized software applications and platforms. We expect to complete this development by the end of 2010. We also intend to invest resources to develop water quantity and water quality monitoring technologies and upgrade our proprietary products.
Related Strategic Initiatives
"In addition to organic growth we are prospecting for additional new opportunities outside of our company. Acquisitions are a key part of our strategy to enhance our business growth and to acquire innovative technology that will enable us to provide quality products, systems and best engineering to our clients.
Management Team Enhancement
"In order to grow successfully, we must have the best talent in our industry. For instance, in the month of June we appointed three senior executives that substantially strengthen our water and wastewater treatment management team. Their seasoned experience and outstanding track records and achievements in water and wastewater treatment fields greatly enhance our competitive advantages in local, domestic and international markets. Their appointments reflect the ongoing growth of our company that values talent- oriented vision, advanced technologies and quality management. This underscores our dedication to be a leading solutions provider in the water, wastewater treatment and pollution control markets," Mr. Zhao said.
Conference Call
Tri-Tech CEO Warren Zhao, President Phil Fan and CFO Peter Dong will host a conference call at 9:00 AM EDT, Monday, August 16, (9:00 PM Beijing/Hong Kong Time on August 16) to review the company's financial results and respond to questions and comments.
To participate, call U.S. Toll Free Number 1-877-941-8416 approximately 10 minutes before the call. International callers, please dial 1-480-629-9812. The conference ID number is 4338089. A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=000078CB . Both an MP3 file one hour after the call and a transcript 48 hours after the call will be available. These will be archived for 90 days via http://www.tri-tech.cn and http://www.hawkassociates.com .
About Tri-Tech Holding Inc.
Tri-Tech designs customized sewage treatment and odor control systems for China's municipalities and its larger cities. These systems combine software, information management systems, resource planning and local and distant networking hardware that includes sensors, control systems, programmable logic controllers, supervisory control and data acquisition systems. The company also designs systems that track natural waterway levels for drought control, monitor groundwater quality and assist the government in managing its water resources. The company is also moving into the industrial pollution control market. Tri-Tech owns 15 software copyrights and two technological patents and employs 200 people. Please visit http://www.Tri-Tech.cn for more information.
An online investor kit including a company profile, press releases, current price quotes, stock charts and other valuable information for investors is available at http://www.hawkassociates.com/profile/trit.cfm . To subscribe to future releases via e-mail alert, visit http://www.hawkassociates.com/about/alert/ .
This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. Among other things, expectations about expansion into adjacent industry verticals, growth of our Industrial Pollution Control Services, and the potential development of the company's other existing service lines contain forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
For more information, please contact:
Investor Contact:
Hawk Associates
Frank Hawkins
Phone: +1-305-451-1888
Email: [email protected]
-FINANCIAL TABLES-
TRI-TECH HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
For The Six Months Ended For The Three Months Ended
June 30, June 30,
2010 2009 2010 2009
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
System
integration $9,095,217 $3,378,358 $5,587,132 $2,058,755
Hardware
products: 2,274,841 1,394,141 1,927,760 296,986
Software
products
revenues: 970,834 1,221,837 587,886 787,788
Total
revenues 12,340,892 5,994,336 8,102,778 3,143,529
Cost of revenues:
(exclusive of
depreciation
and amorti-
zation shown
separately
below)
System
integration 5,589,260 2,354,968 3,438,045 1,471,335
Hardware
products 1,956,082 1,149,323 1,646,342 261,443
Cost of
software 24,455 42,064 14,172 31,853
Total cost of
revenues
(exclusive of
depreciation
and amorti-
zation shown
separately
below) 7,569,797 3,546,355 5,098,559 1,764,631
Operating expenses:
Depreciation and
amortization
expenses 74,608 45,400 34,166 23,817
Selling and
Marketing
expenses 502,286 212,647 300,092 108,340
General and
Admini-
strative
expenses 1,594,093 606,970 897, 585 327,922
Total
operating
expenses 2,170,987 865,017 1,231,843 460,079
Income from
operations 2,600,108 1,582,964 1,772,376 918,819
Other income
(expenses):
Other expense (20,755) (1,153) (15,906) (763)
Interest
income 19,696 835 10,002 400
Interest
expense (2,763) (3,659) (1,134) (3,659)
Tax rebates 81,516 22,767 24,551 22,767
Total other
income, net 77,694 18,790 17,513 18,745
Income before
provision for
income taxes and
noncontrolling
interests income 2,677,802 1,601,754 1,789,889 937,564
Provision for
income taxes 419,420 136,095 351,647 72,532
Net income before
allocation to
Non-controlling
Interests 2,258,382 1,465,659 1,438,242 865,032
Less: Net income
attributable to
Non-controlling
Interests 19,180 13,725 16,655 13,350
Net income
attributable
to Tri-Tech
Holding Inc. $2,239,202 $1,451,934 $1,421,587 $851,682
Other compre-
hensive income
Foreign
currency
translation
adjustment 67,985 16,743 70,709 3,534
Comprehensive
income 2,326,367 1,482,402 1,508,951 868,566
Less: Compre-
hensive income
attributable to
non-controlling
interests 24,034 13,666 21,703 13,317
Comprehensive
income attri-
butable to
Tri-Tech
Holding Inc. $2,302,333 $1,468,736 $1,487,247 $855,249
Net income
attributable
to Tri-Tech
Holding Inc.
per share:
Basic $0.36 $0.41 $0.20 $0.24
Diluted $0.34 $0.41 $0.19 $0.24
Weighted Average
number of
Common Shares
outstanding:
Basic 6,267,348 3,555,000 7,254,714 3,555,000
Diluted 6,505,580 3,555,000 7,413,836 3,555,000
TRI-TECH HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
(Unaudited)
ASSETS
Current Assets
Cash $31,610,527 $7,171,464
Restricted cash 1,546,167 1,501,128
Accounts receivable, net of
allowance for doubtful accounts
of $54,829 and $56,491 as of
June 30, 2010 and December 31,
2009, respectively 13,161,324 4,338,239
Unbilled revenue 2,775,731 3,952,763
Other receivables 1,970,918 273,602
Inventories 2,073,546 1,573,324
Deposits on projects 984,770 585,153
Prepayments to suppliers and
subcontractors 2,035,757 1,898,900
Total current assets 56,158,740 21,294,573
Long-term accounts receivable 328,622 --
Long-term unbilled revenue 1,404,697 1,723,852
Plant and equipment, net 474,845 374,009
Proprietary technology, net 1,058,985 797,854
$59,425,889 $24,190,288
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and cost
accrual on projects $3,436,095 $3,367,056
Customer deposits 759,539 494,047
Billings in excess of revenue -- 8,650
Other payables 532,663 8,633
Accrued liabilities 61,113 103,190
Deferred income taxes -- 141,478
Income taxes payable 686,970 144,232
Current portion of long-term
liabilities 36,556 --
Total current liabilities 5,512,936 4,267,286
Long-term liabilities -- 58,171
5,512,936 4,325,457
COMMITMENTS AND CONTINGENCIES
Equity
Tri-Tech Holding Inc.
shareholders' equity
Common stock ($0.001 par value,
30,000,000 shares authorized;
7,791,833 and 5,255,000 shares
issued as of June 30, 2010 and
December 31, 2009, respectively.) 7,792 5,255
Additional paid-in-capital 44,783,948 12,942,650
Statutory reserves 50,655 50,655
Retained earnings 8,572,545 6,333,343
Treasury stock (122,080) --
Accumulated other comprehensive
income 440,228 377,097
Total Tri-Tech Holding Inc.
shareholders' equity 53,733,088 19,709,000
Noncontrolling Interests 179,865 155,831
Total equity 53,912,953 19,864,831
$59,425,889 $24,190,288
TRI-TECH HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30,
2010 2009
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income before allocation to
non-controlling interests $2,258,382 $1,465,659
Adjustments to reconcile net income
before non-controlling interests
to net cash (used in) provided by
operation activities:
Amortization of option expenses 183,977 --
Amortization of warrants 8,766 --
Depreciation and amortization 74,608 45,729
Provision for doubtful accounts (1,963) 469
Deferred income taxes (149,875) 17,020
Changes in operating assets and
liabilities:
Restricted cash (36,684) --
Accounts receivable (8,755,106) (884,804)
Unbilled revenue 1,192,722 (666,139)
Other receivables (2,083,909) (336,473)
Inventories (489,111) (196,872)
Prepayments and deferred expenses (206,504) 118,516
Accounts payable 50,330 339,921
Customer deposits 261,458 136,774
Billings in excess of revenue (8,654) --
Other payables 602,216 87,924
Accrued liabilities (42,430) (22,885)
Taxes payable 539,222 61,916
Net cash (used in) provided by operating
activities (6,602,555) 166,755
Cash flows from investing activities:
Payment to purchase plant
and equipment (135,574) (191,841)
Payment to purchase intangible asset (293,033) --
Payment of installment of
purchasing vehicle (21,824) --
Net cash used in investing activities (450,431) (191,841)
Cash flows from financing activities:
Proceeds from the exercise of warrants
into common stock 1,377,000 --
Proceeds from the Issuance
of common stock 30,666,876 --
Payment of financing expenses
to agencies (392,784) --
Payment in repurchase treasury stock (122,080) --
Repayments from third parties of advances -- (139,041)
Repayments to third
parties of advances -- (410,818)
Net cash provided by
financing activities 31,529,012 (549,859)
Effect of exchange rate fluctuation
on cash and cash equivalents (36,963) 45,436
Net increase (decrease) in
cash and cash equivalents 24,439,063 (529,509)
Cash and cash equivalents,
beginning of period 7,171,464 732,418
Cash and cash equivalents,
end of period $31,610,527 $202,909
Supplemental disclosure of
cash flow information:
Income taxes paid $183,954 $15,163
Interest paid on debt $2,763 $3,659
SOURCE Tri-Tech Holding Inc.
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