China Industrial Waste Management Announces 2011 Second Quarter Financial Results

Aug 16, 2011, 07:00 ET from China Industrial Waste Management, Inc.

DALIAN, China, Aug. 16, 2011 /PRNewswire-Asia/ -- China Industrial Waste Management, Inc. (OTCBB: CIWT) ("China Industrial Waste Management" or the "Company"), a leading environmental services and solutions provider in China, today announced its financial results for the second quarter ended June 30, 2011.

Second Quarter Highlights

  • Revenues increased 69.4% to $8.3 million
  • Gross profit increased 41.2% to $4.3 million
  • Operating income increased 35.7% to $2.6 million
  • Net income attributable to the Company increased 40.1% to $1.7 million
  • Diluted earnings per share from continuing operations increased 71.4% to $0.12

"In the second quarter of 2011 we achieved another period of excellent financial results, reflecting strong overall demand for our products and services, including hazardous and non-hazardous waste disposal, sludge treatment, and recycled commodities," said Mr. Jason Dong, Chairman and Chief Executive Officer. "Through the first half of the year, our existing operations performed well across the board and we also are making significant progress on our Dagushan expansion project, which we expect to complete in late third quarter 2011. Given our recent momentum, we remain optimistic for continued strong performance in the second half of the year."

Second Quarter 2011 Results

Revenues increased 69.4% to $8.3 million in the second quarter of 2011 from $4.9 million in the same period last year.

Revenues from service fees increased 57.9% to $5.1 million, or 61.1% of total revenues, from $3.2 million, or 65.5% of total revenues, in the prior year period. The increase was due to: (i) increased demand for hazardous and non-hazardous waste disposal services from our existing and new customers, and (ii) approximately $0.2 million of incremental revenues from our sludge treatment business.

Sales of recycled commodities increased 91.3% to $3.2 million, or 38.9% of revenues, compared to $1.7 million, or 34.5% of revenues, in the same period last year. The sharp increase was attributable to: (i) higher sales volume as a result of favorable market prices, (ii) the addition of revenues generated from our disposal program for discarded household appliances which was jointly sponsored by the PRC Ministries of Commerce, Finance and Environmental Protection and started August 1, 2010, and (iii) approximately $600,000 of incremental revenues from our Zhuorui subsidiary, which became operational in 2011.

Gross profit increased 41.2% to $4.3 million from $3.1 million in the same period last year. Gross margin was 51.7% compared to 62.0% in the prior year period. The decline in gross margin is primarily attributable to: (i) the increased service fee revenue generated by our non-hazardous waste treatment operations, which have a lower gross profit margin compared with service fee revenue generated by our hazardous waste treatment operations; and (ii) increased costs for labor, transportation and raw materials utilized to produce recycled waste products.

Income from operations increased 35.7% to $2.6 million from $1.9 million in the prior year period. Operating margin was 30.7% compared to 38.3% in the prior year period. The decrease in operating margin primarily reflects the decline in gross margin, somewhat offset by a decline in operating expenses as a percent of sales to 21.0% in the second quarter of 2011 from 23.7% in the same period last year.  

Net income attributable to the Company increased 40.1% to $1.7 million from $1.2 million in the same period last year. Diluted earnings per share from continuing operations increased 71.4% to $0.12 from $0.07 in the same period last year.    

First Half 2011 Results

For the six months ended June 30, 2011, revenues increased by 59.8% to $14.4 million from $9.0 million in the same period last year. Revenues from service fees, which consist of service fees generated from industrial solid waste treatment, sewage treatment and sludge treatment, were $8.9 million, or 61.6% of revenues, compared to $6.2 million, or 68.4% of revenues, in the same period last year, an increase of 43.8%. Sales of recycled commodities were $5.5 million, or 38.4% of revenues, compared to $2.8 million, or 31.6% of revenues, in the same period last year, representing an increase of 94.4%.  

Gross profit was $7.4 million compared to $5.7 million in the same period last year, an increase of 29.1%. Gross margin was 51.3% compared to 63.5% in the year-ago period. Income from operations was $4.3 million compared to $3.5 million in the prior year period, an increase of 22.9%. Operating margin was 29.7%, compared to 38.8% in the prior year period.  

Net income increased 47.6% to $3.3 million from $2.2 million in the same period last year. Diluted earnings per share from continuing operations increased 100.0% to $0.20 from $0.10 in the same period last year.    

Financial Condition

As of June 30, 2011, the Company had cash and cash equivalents of $7.1 million. Working capital was $10.3 million. Shareholder's equity increased 11.5% to $36.0 million from $32.3 million at the end of 2010. Cash used in operations was $0.5 million, driven by $1.4 million increase in account receivable that served as advances to home appliances stores as required to acquire discarded electronic appliances, $2.2 million increase in inventory of the finished goods produced by Zhuorui after resuming operations in May 2011, $1.2 million increase in advance to suppliers for purchase of raw materials, offset somewhat by a $0.9 million increase in accounts payable.

Recent Developments

In May 2011, the Company's 90% owned subsidiary, Dalian Dongtai Industrial Waste Treatment Co., Ltd. ("Dalian Dongtai"), closed the sale of its entire 65% equity interest in Hunan Hanyang Environmental Protection Science & Technology Co., Ltd. ("Hunan Hanyang"), a waste treatment company established under the laws of the People's Republic of China, for a total purchase price of RMB29 million (approximately $4.46 million) to Hunan Tian Kun Jia He Investment Co., Ltd., a company established under the laws of the People's Republic of China and an unrelated party of the Company .

In July 2011, the Company announced that it has dismissed Jewett, Schwartz,Wolfe & Associates and engaged the firm of UHY LLP as its new independent registered public accountant. The change was announced on Form 8-K and filed with the US Securities and Exchange Commission on July 7, 2011. Both the dismissal of JSW and the appointment of UHY were considered and approved by the Board of Directors of the Company.

Business Outlook

The Company is currently building in Dalian one of the most advanced one-stop service centers for industrial solid waste treatment in China (the "Dagushan Expansion Project"). The construction of the Dagushan Expansion Project is now 95% complete and management expects the center to become operational late in the third quarter of 2011. Once fully operational, this new facility will double the Company's hazardous industrial solid waste treatment capacity to 114,000 tons per year.

Conference Call

The Company will host a conference call at 9:00 a.m. Eastern Daylight Time (EDT) on Tuesday, August 16, 2011, to discuss its financial results for the second quarter of 2011.

To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 275-8968. International callers should call +1 (706) 643-1666. The Conference Pass Code is 88229745.

If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Tuesday, August 16, 2011 at 11:00 a.m. EDT. To access the replay, call (855) 859-2056. International callers should call +1 (404) 537-3406. The Conference Pass Code is 88229745.

About China Industrial Waste Management, Inc.

China Industrial Waste Management is a leading environmental services and solutions provider in China. The Company is based in Dalian, Liaoning Province, China and has been engaged in the industrial solid waste treatment business since 1991. Today, the Company is the largest industrial solid waste management enterprise in northeastern China. China Industrial Waste Management's main businesses are industrial solid waste treatment and recycling, municipal sewage and sludge treatment, and environmental protection engineering.  For more information, please visit the Company's website (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.

Company Contact:


Mr. Darcy Zhang, Corporate Secretary

Tel: +86-411-8259-5339

Email: darcy.zhang@chinaciwt.com

Website: www.chinaciwt.com


CCG Investor Relations:

Mr. Crocker Coulson

Phone: +1-646-213-1915

Email: crocker.coulson@ccgir.com

Website: www.ccgirasia.com



- Financial Tables Follow-

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(STATED IN US DOLLARS ) (UNAUDITED)



For the Three Months Ended June 30,


For the Six Months Ended June 30,



2011


2010


2011


2010

Revenues









   Service fees


$          5,096,403


$          3,226,923


$          8,873,587


$          6,171,481

   Sales of  recycled commodities


3,247,130


1,697,657


5,535,574


2,847,940

       Total revenues


8,343,533


4,924,580


14,409,161


9,019,421










Cost of revenues









   Cost of service fees


2,227,935


1,228,378


3,917,031


2,256,871

   Cost of recycled commodities


1,803,742


643,518


3,096,051


1,031,976

       Total cost of revenues


4,031,677


1,871,896


7,013,082


3,288,847










       Gross profit


4,311,856


3,052,684


7,396,079


5,730,574










Operating expenses









   Selling expenses


171,894


168,680


352,335


320,304

   Research and development expenses


101,929


56,114


196,537


150,722

   General and administrative expenses


1,477,286


941,258


2,567,470


1,758,477

       Total operating expenses


1,751,109


1,166,052


3,116,342


2,229,503










       Income from operations


2,560,747


1,886,632


4,279,737


3,501,071










Other income (expense)









   Interest expense


(287,309)


(209,560)


(527,634)


(449,885)

   Interest income


5,088


-


13,010


-

   Other income


215,154


80,425


335,942


87,592

   Other expense


(330)


(14,669)


(4,285)


(1,935)

   Settlement expense


-


-


-


(439,821)

       Total other expense


(67,397)


(143,804)


(182,967)


(804,049)










Income  from continuing operations before income taxes


2,493,350


1,742,828


4,096,770


2,697,022

   Income taxes


(333,401)


(254,941)


(602,997)


(387,942)

Net income from continuing operations


2,159,949


1,487,887


3,493,773


2,309,080










Loss from operations of discontinued component-Hunan
Hanyang Environmental Protection Science &Technology  
Co., Ltd. (including loss on disposal of $188,886 ), net of
tax


(207,029)


(47,390)


(239,492)


(104,389)










Net income


1,952,920


1,440,497


3,254,281


2,204,691










   Net income attributable to the non-controlling interests


(264,226)


(235,305)


(371,705)


(390,644)

        Net income attributable to the Company


1,688,694


1,205,192


2,882,576


1,814,047

        -Loss attributable to the Company from discontinued
         operation


(200,679)


(30,804)


(221,780)


(67,853)

        -Income attributable to the Company from continuing
         operations


1,889,373


1,235,996


3,104,356


1,881,900










   Foreign currency translation adjustment


457,178


183,453


718,849


184,985










   Comprehensive income attributable to the Company


2,145,872


1,388,645


3,601,425


1,999,032

   Comprehensive income attributable to the non-controlling
   interests


390,721


235,305


571,938


390,644

       Comprehensive income


$          2,536,593


$          1,623,950


$          4,173,363


$          2,389,676










Basic and diluted weighted average shares outstanding









   Basic


15,336,535


15,336,535


15,336,535


15,323,068

   Diluted


15,336,535


17,594,787


15,336,535


17,549,633










Basic and diluted net earnings per share









   Basic:









   Net income


$                   0.11


$                   0.08


$                   0.19


$                   0.12

   -Net income from continuing operations


$                   0.12


$                   0.08


$                   0.20


$                   0.12

   -Net loss from discontinued operation


$                  (0.01)


$                      -


$                  (0.01)


$                      -










   Diluted:









   Net income


$                   0.11


$                   0.07


$                   0.19


$                   0.10

   -Net income from continuing operations


$                   0.12


$                   0.07


$                   0.20


$                   0.10

   -Net loss from discontinued operation


$                  (0.01)


$                      -


$                  (0.01)


$                      -













CHINA INDUSTRIAL WASTE MANAGEMENT, INC.


CONSOLIDATED BALANCE SHEETS


(STATED IN US DOLLARS)










June 30, 2011


December 31, 2010




(Unaudited)




ASSETS






Current assets






   Cash and cash equivalents


$           7,112,182


$           8,163,880


   Notes receivable


286,650


86,364


   Accounts receivable, net


6,349,092


5,146,994


   Other receivables


1,365,367


359,383


   Receivable from subsidiary's buyer


1,856,579


-


   Inventories


7,000,250


4,652,148


   Advances to suppliers


1,780,211


1,624,433


   Deferred expense


156,745


210,752


   Related party receivable


132,252


291,552


   Deferred tax assets


132,457


61,145


Total current assets


26,171,785


20,596,651








   Long-term investment-cost method


154,715


151,515


   Property, plant and equipment, net


35,172,777


32,384,139


   Construction in progress


14,710,637


18,642,061


   Accounts receivable, net


778,105


584,853


   Land use right, net


2,039,508


2,022,384


   Build-Operate-Transfer ("BOT") franchise right


-


4,242,424


   Deposits


78,967


77,152


   Restricted cash


160,289


1,788,510


   Deferred tax assets


682,919


504,017


   Other assets


1,483,102


1,233,580


TOTAL ASSETS


$         81,432,804


$         82,227,286








LIABILITIES AND EQUITY






Current liabilities






   Short-term bank loans


$           3,558,444


$           3,030,303


   Accounts payable


3,396,514


2,458,260


   Tax payable


502,423


513,243


   Advance from customers


800,658


610,508


   Deferred revenue


883,050


394,862


   Accrued expenses


417,635


804,205


   Construction projects payable


2,434,736


3,070,169


   Other payables


364,315


836,141


   Long-term loan-current portion


2,958,923


2,321,970


   Related party payable


529,434


393,939


Total current liabilities


15,846,132


14,433,600








   Long-term bank loans


17,050,553


17,964,962


   Asset retirement obligation


602,473


571,109


   Deferred income-Government subsidy


4,565,182


7,673,724


TOTAL LIABILITIES


38,064,340


40,643,395








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 15,336,535 shares issued and outstanding as of
       June 30, 2011 and December 31, 2010, respectively


15,337


15,337


       Additional paid-in capital


10,456,314


10,337,105


       Statutory Reserves


7,801,019


7,801,019


       Retained earnings


13,687,951


10,805,375


       Accumulated other comprehensive income


4,068,145


3,349,296


          Total stockholders' equity of the Company


36,028,766


32,308,132


   Non-controlling interests


7,339,698


9,275,759


       TOTAL EQUITY


43,368,464

#

41,583,891








       TOTAL LIABILITIES AND EQUITY


$         81,432,804

#

$         82,227,286












CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(STATED IN US DOLLARS ) (UNAUDITED)








For the Six Months ended June 30,



2011


2010






Cash flows from operating activities:





Net income attributable to the Company


$         2,882,576


$          1,814,047

Adjustments to reconcile net income to net cash (used in) provided by operating activities:





   Non-controlling interests


371,705


390,644

   Depreciation


1,282,563


1,033,799

   Amortization


25,290


33,286

   Stock-based compensation


115,322


115,322

   Deferred tax assets


(235,528)


49,665

   Bad debt expense


116,568


113,486

   Gain from disposal of property, plant and equipment


(1,810)


-

   Loss from disposal of a subsidiary


188,886


-

   Stock and warrant issued for settlement


-


439,821

   Stock issued for service


3,887


-

   Interest accretion expenses


19,080


18,314

   Government subsidy recognized as income


(178,854)


(14,337)






Changes in operating assets and liabilities:





   Notes receivable


(196,171)


201,011

   Accounts receivable


(1,376,155)


(2,911,253)

   Construction reimbursement receivable


-


739,586

   Other receivables


(988,008)


19,998

   Inventories


(2,223,878)


(429,084)

   Advance to suppliers


(1,151,335)


(738,292)

   Deferred expenses


53,013


(2,452)

   Related party receivable


(35,260)


-

   Other assets


(220,890)


124,812

   Accounts payable


876,105


777,080

   Tax payable


(21,352)


26,777

   Advance from customers


176,587


81,622

   Accrued expenses


(391,078)


(272,036)

   Deferred revenue


474,308


(605,598)

   Related party payable


125,707


-

   Other payables


(221,851)


(65,500)

Net cash (used in) provided by operating activities


(530,573)


940,718






Cash flows from investing activities:





   Investment in Xiangtan Dongtai


-


(58,604)

   Purchase of property and equipment


(313,374)


(246,186)

   Construction in progress


(3,275,386)


(3,202,966)

   Proceed from disposal of property, plant and equipment


2,475


-

   Purchase of intangible assets


-


(6,873)

   Certificate of deposit


-


293,019

   Cash received from a third party to acquire additional equity interest in
   Sino-Norway Energy Efficiency Dalian Center Co., Ltd.


10,705


-

   Cash received from disposal of a subsidiary


2,375,034


-

   Repayments from a related party


275,271


-

Net cash used in investing activities


(925,275)


(3,221,610)






Cash flows from financing activities





   Repayment of construction project payable


(692,185)


(1,017,247)

   Repayment of long-term bank loans  


(697,737)


(1,122,628)

   Repayment of short-term bank loan


(3,058,572)


(6,739,433)

   Proceeds from short-term bank loans


3,517,357


2,930,188

   Proceeds from long-term bank loan


-


1,611,604

   Subsidy received from government


157,516


-

   Decrease in Restricted cash


967,331


-

Net cash provided by (used in) financing activities


193,710


(4,337,516)






Effect of exchange rate changes in cash and cash equivalents


210,440


29,623






Net decrease in cash and cash equivalents


(1,051,698)


(6,588,785)






Cash and cash equivalents, beginning of period


8,163,880


11,419,129

Cash and cash equivalents, end of period


$         7,112,182


$          4,830,344






Supplemental cash flow information:





   Cash paid during the period for:





       Interest


$            768,174


$             660,077

       Income taxes


$            693,904


$             304,778

   Non-cash investing and financing activities:





       Stock and warrant issued for settlement


$                     -


$             439,821

       Transfer of construction in progress to property, plant and equipment


$         3,151,443


$                      -









SOURCE China Industrial Waste Management, Inc.



RELATED LINKS

http://www.chinaciwt.com