2014

Zeolite Reports Record Third Quarter 2006 Results * Revenues from NPCC Increased 50% Sequentially to $5.4 Million



    TAIAN CITY, Shandong, China, Nov. 15 /Xinhua-PRNewswire-FirstCall/ --
 Zeolite Exploration Company (OTC Bulletin Board:   ZXPL), a leading nano
 precipitated calcium carbonate (NPCC) and coal-based chemical products
 manufacturer in the People's Republic of China (''PRC''), today reported
 financial results for the third quarter ended September 30, 2006. Pending
 shareholder approval, Zeolite expects to amend its articles of
 incorporation to formally change its corporate name to ''ShengdaTech,
 Inc.'' in the near future.
     Q3 Highlights
     -- Record revenues of $18.8 million increased 30% sequentially
     -- Strong sequential revenue growth of 50% from the NPCC segment
     -- New NPCC factory in Xianyang City operating at 80% capacity
     Revenues for the third quarter of 2006 increased to a record $18.8
 million, up 30.0% sequentially from $14.5 million in the second quarter of
 2006 and up 9.7% from the third quarter 2005 of $17.2 million. Operating
 income for the quarter increased to $4.8 million, up 51.4% from the second
 quarter of 2006 of $3.1 million and remained flat compared to the third
 quarter 2005. Net income increased to $4.8 million or 52.1% from the
 previous quarter of $3.2 million but was down slightly from $4.9 million in
 the same period a year ago. Fully diluted earnings per share for the third
 quarter 2006 was $0.09 compared to $0.06 in both the second quarter 2006
 and the third quarter 2005.
     Commenting on the quarter, Xiangzhi Chen, President, CEO and Director
 of Zeolite, ''We are pleased to achieve record results for the quarter and
 to see continued strong growth in both our NPCC and chemical segments. Our
 new NPCC facility is fully operational and we are already in the process of
 expanding capacity. Moreover, our new R&D center and key relationships with
 top universities enables us to stay at the cutting edge of NPCC
 applications which is a significant part of our growth strategy.''
     Revenue growth during the quarter was driven by a 50.0% increase in
 NPCC sales to $5.4 million from the previous quarter of $3.6 million and a
 38.2% increase from the third quarter 2005 of $3.9 million. Revenue from
 NPCC was primarily comprised of sales for applications in tires and PVC
 material which represented 60.0% and 31.2%, respectively, of total NPCC
 revenue. Demand of NPCC for both tires and PVC continue to remain strong as
 revenue from each increased 43.5% and 58.9%, respectively, from the second
 quarter of 2006.
     Revenues from chemical products increased 23.5% to $13.5 million from
 $10.9 million in the previous quarter and 1.3% from $13.3 million in the
 third quarter 2005. Melamine represented the strongest growth in the
 chemical segment increasing to $2.2 million or 41.9% from revenue of $1.6
 million in the third quarter 2005. Methanol production capacity reached
 100% as revenues from methanol grew 24.6% from the previous quarter. The
 percentage of revenue contribution from the NPCC segment increased to 28.5%
 of revenue with 71.7% of revenue derived from chemical segments. This
 compares with chemical and NPCC revenue breakdown of 75.3% and 24.7%,
 respectively in the previous quarter and 77.4% and 22.6%, respectively for
 the same period a year ago.
     Gross profit for the third quarter of 2006 was $5.6 million, an
 increase of 33.4% from $4.1 million sequentially and up 5.1% from the third
 quarter 2005 of $5.3 million. Gross margin for the quarter was 29.7%,
 compared to 28.9% in the previous quarter and 30.9% for the same period in
 2005. The decrease in gross margin from a year ago is attributed to the
 impact of the decrease in gross margin of ammonium bicarbonate due to
 industry price compression within the chemical segment. The gross margin
 for the chemical segment was 26.6% for the quarter compared to 26.0% in the
 second quarter 2006 and 29.7% in the third quarter 2005. The gross margin
 for the NPCC segment was at 37.3% in the third quarter compared to gross
 margin in the previous quarter of 37.8% and the third quarter 2005 of
 35.2%. Year over year gross margin from the NPCC segment benefited from
 increased production efficiencies.
     Selling expenses for the quarter were $309,412, or 1.6% of revenue,
 compared to $385,941 or 2.7% of revenues, in the previous quarter and
 $231,279, or 1.3% of revenues, in third quarter 2005. The decrease in
 selling expenses is due to a fiscal adjustment for rebates given to
 customers.
     General and administrative (G&A) expenses were $502,615 or 2.7% of
 revenues, as compared to $648,416, or 4.5% of revenues, in the second
 quarter 2006 and $241,706, or 1.4% of revenues, from the same period a year
 ago. G&A expenses include a one time fee of $263,707 for the termination of
 a license agreement with Singapore Nano Materials Pte. Ltd. in the second
 quarter 2006.
     Operating income for the third quarter increased 51.4% to $4.8 million
 from second quarter 2006 operating income of $3.1 million and down 1.4%
 from $4.8 million for the third quarter of 2005.
     Net income for the quarter increased 52.1% to $4.8 million from $3.2
 million for the second quarter 2006 and down 1.1% from $4.9 million in the
 same period a year ago. Fully diluted earnings per share for the third
 quarter 2006 was $0.09 compared to $0.06 in both the second quarter 2006
 and the third quarter 2005.
     Nine Months Results
     Revenues for the first nine months of 2006 increased 14.2% to $49.4
 million, compared to $43.3 million in the same period last year. Gross
 profit was $13.7 million, up 4.1% from $13.2 million in the first nine
 months of 2005. Operating income was $11.2 million, down 5.5% from $11.8
 million from the same period a year earlier. Net income decreased 4.4% to
 $11.4 million compared to $11.9 million in the first nine months of 2005.
 Fully diluted earnings per share for the period was $0.23 compared to $0.14
 for the first nine months of 2005.
     Financial Condition
     As of September 30, 2006, Zeolite had $23.3 million in cash and cash
 equivalents, $26.4 million in working capital and no long-term debt. Net
 cash provided by operating activities for the nine months ended September
 30, 2006 was $11.3 million. Shareholders' equity stood at $51.0 million, up
 from $24.8 million at year end 2005.
     Business Outlook
     Zeolite is continuing to strengthen its leadership position in the NPCC
 market as it is now the largest supplier of NPCC in the world. The new
 factory opened in August at Xianyang City is currently at 80% of
 utilization and is expected to be at 100% utilization by the end of the
 year. The Company has already ordered the equipment for the expansion of
 40,000 metric tons of additional NPCC capacity which is expected to be
 completed by April 2007. An additional 60,000 metric tons of capacity is
 planned to be completed by the third quarter 2007.
     ''We expect to see continued growth in our higher margin NPCC segment
 as we expand our capacity in 2007 and enhance our marketing efforts both
 domestically and internationally. To support our sales efforts, we have
 created an aggressive sales team of 24 sales reps, all with master degrees
 in the chemical field,'' commented Mr. Chen. ''We are also focusing a
 significant amount of our efforts in R&D and plan to set up two
 nanotechnology laboratories and a material inspection and testing center.
 Our R&D efforts are a critical part of acquiring new customers as each
 customer has its own proprietary formula for its products. As for our
 chemical business we plan to expand our methanol capacity and are in the
 process of conducting a feasibility assessment for diethyl ether.''
     Capital expenditures for the fourth quarter are expected to be around
 $6.4 million. Zeolite is maintaining its year-end guidance of $71.0 and
 $73.0 million in revenues and net income in the range of $15.0 and $17.0
 million.
     Conference Call
     Zeolite will host a conference call on Wednesday, November 15th at 9:00
 am ET to discuss results for the third quarter of 2006. Joining Xiangzhi
 Chen, Zeolite Exploration's Chief Executive Officer on the call will be
 Anhui Guo, the Chief Financial Officer and Richard Dean, the Company's U.S.
 Representative. To participate in the conference call, please dial the
 following number five to ten minutes prior to the scheduled conference call
 time: (888) 419- 5570. International callers should dial (617) 896-9871.
 The pass code for the call is 34117070. If you are unable to participate in
 the call at this time, a replay will be available on Wednesday, November
 15, 2006 at 11:00 AM ET through Wednesday, November 22, 2006 at 11:00 AM
 ET. To access the replay, dial (888) 286-8010. International callers should
 dial (617) 801-6888. The conference passcode is 34117070. This conference
 call will be broadcast live over the Internet and can be accessed by all
 interested parties by clicking on
 http://phx.corporate-ir.net/playerlink.zhtml?c=177763&s=wm&e=1414274 .
 Please access the link at least fifteen minutes prior to the start of the
 call to register, download, and install any necessary audio software. For
 those unable to participate during the live broadcast, a 90-day replay will
 be available shortly after the call by accessing the same link.
     About the Company
     The Company is engaged in the business of manufacturing, marketing and
 selling a variety of nano precipitated calcium carbonate ("NPCC") products
 and coal-based chemicals for use in various applications. The Company
 converts limestone into NPCC using its proprietary technology. The unique
 chemical and physical attributes make NPCC a valuable ingredient in tires,
 paints, polyvinyl chloride ("PVC") building materials and other products.
 It enhances the durability of many products by increased strength, heat
 resistance, and dimension stabilization. The Company is also engaged in the
 manufacture and sale of coal-based chemical products namely ammonium
 bicarbonate, liquid ammonia, melamine and methanol. The Company markets and
 sells its coal-based products mainly for chemical fertilizers and raw
 materials in the production of organic and inorganic chemical products,
 including formaldehyde and pesticides.
     Safe Harbor Statement
     Under the Private Securities Litigation Reform Act of 1995: Any
 statements set forth above that are not historical facts are
 forward-looking statements that involve risks and uncertainties that could
 cause actual results to differ materially from those in the forward-looking
 statements, which may include, but are not limited to, such factors as
 unanticipated changes in product demand especially in the tire industry,
 changes in composition of tires, pricing and demand trends for the
 Company's chemical products, changes to government regulations, risk
 associated with operation of the Company's new manufacturing facility, risk
 associated with large scale implementation of the New NPCC manufacturing
 process, the ability to attract new customers, ability to increase its
 product's applications, ability of its customers to sell products, cost of
 raw material, downturns in the Chinese economy, and other information
 detailed from time to time in the Company's filings and future filings with
 the United States Securities and Exchange Commission. The Company
 undertakes no duty to update any forward-looking statement to conform the
 statement to actual results or changes in the company's expectations.
                          -- Financial Tables Below --
 
 
                  ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
                      CONDENSED CONOLIDATED BALANCE SHEETS
                                  (unaudited)
 
                                          September 30,       December 31,
                                             2006                2005
                                          (unaudited)
     ASSETS
     Current Assets:
         Cash and cash equivalents        $23,293,098        $10,749,300
         Trade accounts receivable,
          less allowance for doubtful
         account of $44 (unaudited)
          and $0, respectively              5,023,890          3,929,082
         Other non-trade receivables        4,079,775          4,014,861
         Advances to suppliers                128,963            262,591
         Inventory                          2,844,865          1,478,510
         Receivable from related
          parties                               1,581            943,308
     Total Current Assets                  35,372,172         21,377,652
     Property and Equipment, net of
      accumulated depreciation of          24,521,021          8,579,676
     $3,263,948 (unaudited) and
      $2,545,460, respectively
     Construction in progress                  91,859                 --
     TOTAL ASSETS                         $59,985,052        $29,957,328
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
     Current Liabilities:
         Trade accounts payable            $3,342,104         $1,618,492
         Other payables and accrued
          expenses                          2,440,821          1,936,971
         Income and other taxes
          payable                             651,163          1,282,059
         Payable to related parties         2,519,038            347,218
     Total Current Liabilities              8,953,126          5,184,740
     Shareholders' Equity
         Common stock - $0.00001 par
          value; 1000,000,000 shares
           authorized,
         54,095,103 shares
          (unaudited) and 45,120,000
           shares outstanding,
            respectively                          541                451
         Additional paid-in capital        22,641,997          8,608,864
         Retained earnings                 27,340,778         15,962,471
         Accumulated other
          comprehensive income (loss)       1,048,610            200,802
     Total Shareholders' Equity            51,031,926         24,772,588
 
     TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY                              $59,985,052        $29,957,328
 
 
 
                  ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
                 CONDENSED CONOLIDATED STATEMENTS OF OPERATIONS
                            AND CONPREHEHSIVE INCOME
                                  (unaudited)
 
                           For the Three Months        For Nine Months
                            Ended September 30        Ended September 30
                            2006          2005        2006         2005
 
     Sales of Products  $18,818,207  $17,159,831  $49,418,129  $43,258,493
     Cost of Products
      Sold               13,237,343   11,850,618   35,717,463   30,100,498
     Gross Profit         5,580,864    5,309,213   13,700,666   13,157,995
     Operating Expenses:
         Selling
          expense           309,412      231,279      751,842      628,591
         General and
          administrative
          expense           502,615      241,706    1,758,507      686,388
     Total Operating
      Expenses              812,027      472,985    2,510,349    1,314,979
     Income from
      Operations          4,768,837    4,836,228   11,190,317   11,843,016
     Other Income
      (Expense):
        Interest
         income              33,480       21,496       77,899       56,405
        Other
         income                  --           --      126,585           --
        Other
         expense                 --           --      (16,494)          --
     Net Other Income
      (Expense)              33,480       21,496      187,990       56,405
     Income Before Income
      Taxes               4,802,317    4,857,724   11,378,307   11,899,421
        Provision
         for Income
         Taxes                   --          --           --            --
     Net Income          $4,802,317   $4,857,724  $11,378,307  $11,899,421
        Comprehensive
         income: foreign
         currency
         translation
         adjustments         36,584      203,684      152,326      253,639
        Comprehensive
         income          $4,838,901   $5,061,408  $11,530,633  $12,153,060
     Basic and Diluted
      Earnings Per Share      $0.09        $0.06        $0.23        $0.14
        Basic and
         Diluted Weighted
        Average Shares
         Outstanding     54,095,103   87,305,912   51,103,402   87,305,912
 
 
 
                  ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
                 CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)
 
                                             For the Nine Months
                                              Ended September 30
 
 
                                           2006              2005
 
     Cash Flows from Operating
      Activities:
         Net income                     11,378,306        11,899,421
         Depreciation and
          amortization                     659,681           760,482
         Changes in assets and
          liabilities:
         Account receivables            (1,004,215)         (293,383)
         Other receivables                  14,314        (4,349,627)
         Advances to suppliers             137,064          (367,029)
         Inventory                      (1,320,184)       (1,009,879)
         Other current assets                   --            (9,828)
         Trade accounts payable          1,667,554        (1,136,694)
         Other payables and
          accrued expenses                 459,644           228,883
         Income and other taxes
          payable                         (647,947)        2,831,156
         Advances from customers                --           (75,515)
     Net Cash Provided By Operating
      Activities                        11,344,217         8,477,987
     Cash Flows from Investing
      Activities:
         Purchase of property and
          equipment                    (16,231,659)       (2,716,747)
         Construction in progress          (90,696)
     Net Cash (Used) Provided by
      Investing Activities             (16,231,659)       (2,716,747)
     Cash Flows from Financing
       Activities
         Proceeds from issuance
          of common stock               13,969,714                --
         Changes in accounts
          payable - related
           parties                       3,085,771        (2,344,778)
         Distribution to
          shareholders                          --        (7,822,477)
     Net Cash (Used in) Provided
      by Financing Activities           17,055,485       (10,167,263)
         Effect of Exchange Rate
          Changes in Cash                  375,755           253,107
         Net Change in Cash             12,543,798        (4,152,916)
         Cash and Cash
          Equivalents at
           Beginning of Period          10,749,300        10,409,891
         Cash and Cash
          Equivalents at End of
           Period                       23,293,098         6,256,975
 
 
 
                         Three Months Ended          Three Months Ended
                         September 30, 2006              June 30 2006
                      Revenues   Gross Margin     Revenues      Gross Margin
 
     Chemical       $13,458,162      26.60%      $10,894,122       26.00%
     NPCC            $5,360,045      37.30%       $3,579,157       37.80%
     Total          $18,818,207                  $14,473,279
 
 
 
                                  Three Months Ended
                                  September 30, 2005
 
                              Revenues         Gross Margin
     Chemical               $13,280,070          29.70%
     NPCC                    $3,879,761          35.20%
     Total                  $17,159,831
 
 
     For more information, please contact:
 
      Crocker Coulson, President
      Leslie Richardson, Financial Writer
      CCG Elite Investor Relations
      Tel:   +1-310 231-8600 ext 103
      Email: crocker.coulson@ccgir.com
 
      Rick Dean. U.S. Representative
      Zeolite Exploration Company
      Tel:   +1-716-626-3535
      Email: rick@heritagemgmt.net
 
 

SOURCE Zeolite Exploration Company

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