BEIJING, Aug. 30 /PRNewswire-Asia-FirstCall/ -- China Infrastructure Construction Corp. (OTC Bulletin Board: CHNC) ("CHNC," "the Company," "We," "Us"), one of the major U.S.-listed providers of ready-mix concrete in Beijing, today announced the financial results for its fourth quarter and full fiscal year 2010 ended May 31, 2010.
Fourth Quarter Fiscal Year 2010 Highlights -- Net revenue increased 80.05% to $22.34 million year over year -- Gross profit increased 124.62% to $7.35 million year over year -- Net income increased 169.39% to $5.90 million year over year -- Gross margin was 32.92% compared to 26.39% for the same period last year Full Fiscal Year 2010 Highlights -- Net revenue increased 10.81% to $74.00 million year over year -- Gross profit increased 38.74% to 18.04 million year over year -- Net income decreased 228.42% to 13.43 million net loss year over year -- Adjusted net income(*) was $14.19 million, up 35.61% from $10.46 million in the prior year period -- Gross margin was 24.38% compared to 19.47% for the same period last year
"We are pleased with our solid performance during the fourth quarter which enabled us to complete our 2010 fiscal year on a strong note, exceeding our income requirements under the Subscription Agreement dated October 16, 2009," said Mr. Rong Yang, Chairman, and CEO of CHNC. "Our geographic expansion started to pay-off as our Xi'an facility became fully operational in April and contributed to our results for the last two months of the quarter. The Xi'an region is poised for continued growth as the Chinese government is determined to rebalance economic growth in favor of the western part of the country. New facilities in Shidu and Tangshan and value-added technical solution services in Tianjin further contributed to the substantial increase in top and bottom lines during the quarter."
Financial Summary Fourth Quarter Fiscal Year 2010 Results (In million) other than EPS Q4 FY2010 Q4 FY2009 Change (Unaudited) (Unaudited) Net Revenue $ 22.34 $ 12.41 80.05% Gross Profit $ 7.35 $ 3.27 124.62% GAAP Net Income (Loss) $ 5.90 $ 2.19 169.39% Adjusted Net Income(*) $ 6.04 $ 2.19 175.83% GAAP EPS (Basic and Diluted) $ 0.46 $ 1.43 -- Adjusted EPS (Basic and Diluted)(*) $ 0.47 $ 1.43 -- (*) Adjusted Net Income and Adjusted EPS for the three months ended May 31, 2010 are non-GAAP calculations and did not include non-cash, stock-based option expense of $140,973.
Net revenue for the fourth quarter ended May 31, 2010 was $22.34 million as compared to $12.41 million for the same period last year, an increase of 80.05%. The robust increase in net revenue is mainly attributable to good execution of the Company's geographic expansion strategy. The new factories in Xi'an and Shidu started operations during the quarter to meet rising market demand. As a result, the sales volume of concrete products increased approximately 28.61% for the fiscal year ended May 31, 2010 as compared to the same period last year. The increase in net revenue also resulted from technical solution services provided to a Tianjin concrete producer from late March with approximately $1.26 million in sales recorded during the quarter. The Company also leased stone and sand production equipment from a supplier in Hebei to secure raw materials for its Beijing facility. All the sand and stone from the leased equipment has been exclusively provided to the Company since April. Not only did this arrangement provide the necessary raw materials for the Beijing facility during the quarter but it also contributed approximately $0.90 million to revenues for the quarter.
Gross profit for the three months ended May 31, 2010 was $7.35 million, an increase of approximately 124.62%, as compared to $3.27 million in the prior year period. The significant increase in gross profit was primarily driven by higher sales from our new production locations, value-added technical solution services, and vertical integration in the Company's product line which lowered the cost of goods sold.
Selling, general and administrative expenses for the three months ended May 31, 2010 were $1.38 million as compared to $0.97 million for the same period of the last year, an increase of $0.41 million or approximately 42.47%. The increase in SG&A expenses was primarily due to higher professional fees incurred as a public company such as fees related to legal, auditing, financial reporting and filing.
Operating income for the three months ended May 31, 2010 totaled $5.98 million, an increase of $3.67 million or approximately 159.02%, as compared to $2.31 million for the three months ended May 31, 2009. The increase was mainly due to increased net revenue.
GAAP net income for the three months ended May 31, 2010 was $5.90 million, an increase of $3.71 million or approximately 169.39%, as compared to $2.19 million for the three months ended May 31, 2009. The increase was mainly a result of increased net revenue and improved operational efficiency. Net income per share for the fourth quarter of the fiscal year 2010 was $0.46 (basic and diluted, based on 12.77 million and 12.80 million basic and diluted weighted average shares outstanding), compared to net income per share of $1.43 for the same period of the last year (basic and diluted, based on 1.53 million weighted average shares outstanding). On September 28, 2009, the Company effected a 1-for-10 reverse stock split of the Company's common stock (the "Reverse Stock Split"). Upon the Reverse Stock Split, ten (10) shares of the outstanding common stock were automatically converted into one (1) share of common stock.
Full Fiscal Year 2010 Results (In million) other than EPS FY2010 FY2009 Change (Audited) (Audited) Net Revenue $ 74.00 $ 66.78 10.81% Gross Profit $ 18.04 $ 13.00 38.74% GAAP Net Income (Loss) $ (13.43) $ 10.46 (228.42%) Adjusted Net Income(**) $ 14.19 $ 10.46 35.61% GAAP EPS (Basic and Diluted) $ (1.66) $ 7.40 -- Adjusted EPS (Basic and Diluted)(**) $ 1.75 $ 7.40 -- (**) Adjusted Net Income and Adjusted EPS for full fiscal year 2010 are non-GAAP calculations and do not include non-cash, stock-based compensation charges of $27.42 million and non-cash, stock-based option expense of $199,003.
Net revenue for the twelve months ended May 31, 2010 was $74.00 million compared to $66.78 million for the same period of the last year, representing an increase of $7.22 million, or approximately 10.81%. The increase in net revenue was primarily driven by strong sales growth fueled by our continued geographic expansion, increased production from new facilities and value-added new services.
Gross profit for the fiscal year 2010 was $18.04 million, an increase of $5.04 million or approximately 38.74%, as compared to $13.00 million for the same period of last year. The increase in gross profit is attributable to higher sales growth and stringent cost control of the goods sold. As a result, gross profit margin for the twelve months ended May 31, 2010 was 24.38%, compared to 19.47% for the same period of last year.
Selling, general and administrative expenses for the fiscal year ended May 31, 2010 were $31.32 million as compared to $1.93 million for the same period last year, an increase of $29.39 million. The increase in SG&A expenses was primarily due to increased professional expenses as a public company. A one-time non-cash compensation expense of $27.42 million and non-cash stock option expense of $199,003 was included for the year ended May 31, 2010.
Our operating loss for the fiscal year ended May 31, 2010 was $13.29 million, a decrease of $24.36 million, or approximately 220.01% as compared to operating income of $11.07 million for the fiscal year ended May 31, 2009. The decrease was mainly due to the $27.42 million one-time non-cash compensation expense and $199,003 non-cash stock option expense included in selling, general, and administrative expenses for the year ended May 31, 2010. Excluding the non-cash equity compensation charges of $27.42 million and $199,003 of non-cash stock option expense, operating income for the twelve months ended fiscal year 2010 would have been $14.34 million with operating margins of 19.37%.
Net loss was $13.43 million for the fiscal year ended May 31, 2010, compared to net income of $10.46 million in the last fiscal year, a decrease of $23.90 million or approximately 228.42%. The decrease was primarily due to the $27. 42 million one-time non-cash compensation expense and $199,003 non- cash stock option expense included in selling, general, and administrative expenses for the year ended May 31, 2010.
Adjusted net income, excluding one-time non-cash equity compensation expense of $27.42 million and non-cash stock-based option expense of $199,003, was $14.19 million for the fiscal year 2010, compared to adjusted net income of $10.46 million in the prior year. Adjusted net income per share for the fiscal year 2010 was $1.75 (basic and diluted, based on 8.11 million basic and diluted weighted average shares outstanding), compared to adjusted net income per share of $7.40 the same period of the last year (basic and diluted, based on 1.41 million weighted average shares outstanding). On September 28, 2009, the Company effected the Reverse Stock Split pursuant to which ten (10) shares of the outstanding common stock were automatically converted into one (1) share of common stock.
As of May 31, 2010, the Company had cash and cash equivalents of $1.10 million. It has historically funded its working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Its working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our project contracts, the progress of our contract execution, and the timing of accounts receivable collections.
Fiscal Year Ended May 31 2010 2009 Net cash provided by (used in) operating activities $(10,208,535) $2,277,902 Net cash used in investing activities (4,015,685) (2,375,085) Net cash provided by financing activities 14,408,077 123,861 Effect of exchange rate change on cash and cash equivalents (2,819) 58,185 Net increase in cash and cash equivalents 181,038 84,863 Cash and cash equivalents, beginning balance 921,841 836,978 Cash and cash equivalents, ending balance $ 1,102,879 $ 921,841
Net cash used in operating activities was $10.21 million for the fiscal year ended May 31, 2010, a decrease of $12.49 million, or 548.16%, as compared to net cash of $2.28 million provided by operating activities for the fiscal year ended May 31, 2009. The decrease of net cash used in operating activities was due to the increase of trade accounts receivable. The trade accounts receivable increased because of growing sales. The Company typically has long-term annual and multi-year contracts with its major customers. It enters into varying payment terms with its customers ranging from payment before delivery, payment on delivery or up to 1 year after the project completion. As of May 31, 2010, trade accounts receivable with aging over twelve months old amounted to $339,034, or only 0.63% of total trade accounts receivable. The Company collected approximately $5.20 million of accounts receivable from June 1, 2010 to Aug. 30, 2010.
Mr. Yang concluded, "As we enter fiscal year 2011, our focus remains on strong execution of the strategies that have started to serve us well, mainly geographic expansion through new facilities or M&A opportunities and vertical integration of product lines into raw materials to secure supplies and lower production costs. We are fully aware of the concerns about a potential real estate bubble in China but our recent strategic moves have strongly aligned our business with China's massive investments in infrastructure. This is a must for the country given the rapid pace of urbanization, the acceleration of industrialization and the need to rebalance economic growth geographically. According to The National Development and Reform Commission, China planned to invest in excess of $100 billion in the year 2010 spread out among 23 infrastructure projects in the western regions. It is estimated that by 2011, China will spend about $725 billion dollars for infrastructure projects. We believe that we are well positioned to benefit from this broad infrastructure development that creates tremendous market opportunities for us. We are confident that our solid business platform, geographic expansion and strong execution will bring revenue growth, gross margin improvement and higher earning power."
About China Infrastructure Construction Corporation
CHNC was founded in 2002 in Beijing, China. Since then it has developed into one of the top ready-mix concrete producers in Beijing. Its products are environmentally-friendly as CHNC is one of the providers of "green" concrete in China. Both the Company's revenue and net profit have shown significant growth in the last few years. Currently, the Company has four prime production facilities and eight production lines with a total operation capacity of 3.5 million cubic meters based on historical utilization rate. One production facility is located in Beijing's Nanhaizi area, on the west side of the Yizhuang Economic Development Zone south of Beijing. One is located in the Shidu area, within the boundaries of the Zhangfang and Beijing Fangshan district. One is located in the Tangshan Development Zone, about two hundred kilometers east of Beijing and one is located in Xi'an.
In addition to its production and profit prowess, CHNC is a leader in China's "Green Concrete" movement referring to increased use of the environmentally-friendly content in ready-mix concrete, by reducing the energy and raw material consumption in its production, and by mixing and recycling various industrial wastes to create a more sustainable product.
All of CHNC's products have passed the ISO9001-2005 Certification Quality System and Integrated Certification System including Quality Management System Certification, Environmental Management System Certification and Occupational Health and Safety Management System Certification issued by Beijing Zhong Jian Xie Certification Centre.
Its major projects include the Beijing World Trade Central Business District project, and the Beijing Wangjing International Mansion.
Use of Non-GAAP Financial Measures
GAAP results for twelve months ended May 31, 2010 include non-cash expenses related to change in the fair value of the Company's stock compensation. The non-GAAP measure provides a consistent basis for investors to understand our financial performance in comparison to historical periods without variation of non-recurring items and non-operating related charges. In addition, it allows investors to evaluate our performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, we compensate for these limitations by providing the relevant disclosure of the items excluded.
Because these expenses are non-cash, and not related to the Company's operating results, the Company believes that the non-GAAP information is useful to supplement the Company's condensed consolidated financial statements. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
Certain statements made in this news release, may contain forward-looking statements concerning the Company's business and products. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned capacity expansion and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs, but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors may include, but are not limited to, such factors as unanticipated changes in product demand especially in the infrastructure construction industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large-scale implementation of the Company's business plan, the ability to attract new customers, ability to increase its products' applications, cost of raw materials, 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. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and 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.
For more information, please contact: China Infrastructure Construction Corporation Melody Shi Chief Financial Officer US mobile: +1-949-468-7078 China mobile: +86-136-2106-6511 Email: firstname.lastname@example.org Christensen Investor Relations Thomas A. Myers China Mobile: +86-139-1141-3520 Email: tmyers@Christensenir.com Kathy Li Tel: +1-480-614-3036 Email: kli@Christensenir.com CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2010 AND 2009 May 31, 2010 2009 Assets Current assets Cash and cash equivalents $1,102,879 $921,841 Restricted cash 146,089 -- Trade accounts receivable, net 53,411,689 26,438,106 Other receivables 950,671 -- Inventories 575,452 885,834 Total current assets 56,186,780 28,245,781 Property, plant and equipment, net 7,995,701 5,649,835 Prepayments 1,289,007 -- Other receivables - long term 4,955,648 270,819 Related party receivables 1,286,945 674,289 Total other assets 7,531,600 945,108 Total assets $71,714,081 $34,840,724 Liabilities and equity Current liabilities Trade accounts payable $13,376,119 $10,173,765 Related party payable 47,125 564,419 Other payables 2,217,307 1,730,290 Current portion of capital lease obligations 1,949,183 -- Accrued expenses 491,885 277,329 Bank loan payable 1,317,600 -- Total current liabilities 19,399,219 12,745,803 Long-term liabilities Long-term portion of capital lease obligations 2,185,820 -- Total long-term liabilities 2,185,820 -- Total liabilities 21,585,039 12,745,803 Stockholders' equity Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding -- -- Common stock: no par value; 100,000,000 shares authorized; 12,815,620 and 1,529,550 shares issued and outstanding as of May 31, 2010 and May 31, 2009 42,252,295 1,396,644 Retained earnings 4,321,221 17,755,631 Accumulated other comprehensive income 1,509,314 1,731,951 Total China Infrastructure Construction Corporation stockholders' equity 48,082,830 20,884,226 Noncontrolling interests 2,046,212 1,210,695 Total liabilities and equity $71,714,081 $34,840,724 The accompanying notes are an integral part of this statement. CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE FISCAL YEARS ENDED MAY 31, 2010 AND 2009 YEARS ENDED MAY 31, 2010 2009 Sales Revenue, Net $73,998,463 $66,778,296 Cost of goods sold 55,960,792 53,776,934 Gross profit 18,037,671 13,001,362 General and administrative expenses 31,323,026 1,931,333 Net operating income (loss) (13,285,355) 11,070,029 Other income (expense): Interest income 4,424 -- Interest expense (163,646) (2,097) Other income 857,170 -- Total other income (expense) 697,948 (2,097) Net income (loss) before income taxes (12,587,407) 11,067,932 Income taxes -- -- Net income (loss) (12,587,407) 11,067,932 Less: Net income attributable to noncontrolling interests 847,003 606,723 Net income (loss) attributable to China Infrastructure Construction Corporation $(13,434,410) $10,461,209 Earnings (loss) per share - basic and dilutive $(1.66) $7.40 Basic and dilutive weighted average shares outstanding 8,106,833 1,413,047 Comprehensive income Net income (loss) (12,587,407) 11,067,932 Foreign currency translation adjustment (234,123) 448,057 Comprehensive income (loss) $(12,821,530) $11,515,989 Comprehensive income attributable to non-controlling interests $835,517 $629,126 Comprehensive income (loss) attributable to China Infrastructure Construction Corporation $(13,657,047) $10,886,863 The accompanying notes are an integral part of this statement. CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED MAY 31, 2010 AND 2009 May 31, 2010 2009 Cash flows from operating activities: Net income (loss) $(12,587,407) $11,067,932 Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Gain from property, plant and equipment disposal (496,816) -- Bad debt expenses 85,170 18,900 Depreciation 1,174,021 695,464 Shares issued for compensation 27,422,242 -- Stock option expenses 199,003 -- Changes in operating liabilities and assets: Trade accounts receivable (27,095,999) (16,117,557) Prepayments (1,291,119) 247,541 Inventories 311,124 448,959 Other receivables (1,835,744) 219,695 Trade accounts payable 3,204,875 4,539,958 Other payables 511,779 1,152,541 Accrued expenses 190,336 4,469 Net cash provided by (used in) operating activities (10,208,535) 2,277,902 Cash flows from investing activities: Property, plant, and equipment additions (2,692,568) (46,544) Deposits - construction in progress -- (1,826,851) Payments to related party receivable (1,898,489) (501,690) Proceeds from related party receivable 575,372 -- Net cash used in investing activities (4,015,685) (2,375,085) Cash flows from financing activities: Shares issued for cash 13,234,406 -- Restricted cash (146,089) -- Bank loan payable 1,319,760 -- Proceeds from related party payable -- 123,861 Cash acquired in recapitalization -- -- Net cash provided by financing activities 14,408,077 123,861 Effect of rate changes on cash (2,819) 58,185 Increase (decrease) in cash and cash equivalents 181,038 84,863 Cash and cash equivalents, beginning of period 921,841 836,978 Cash and cash equivalents, end of period $1,102,879 $921,841 Supplemental disclosures of cash flow information: Interest paid in cash $119,619 Income taxes paid in cash $ -- $ -- Non-cash investing activities: Acquisition of property, plant and equipment through other payable $4,141,781 $ -- Disposal of property, plant and equipment through other receivable $3,808,920 $ -- Related party receivable offset by payable to related party payable $674,289 $ -- The accompanying notes are an integral part of this statement. CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED MAY 31, 2010 AND 2009 Retained Earnings Common Stock (Accumulated Shares Amount Deficit) Balance: May 31, 2008 1,200,000 $1,368,021 $7,294,422 Shares effectively issued to former shareholder as part of the recapitalization on 10/8/2008 329,550 28,623 -- Foreign currency translation adjustment -- -- -- Net income (loss) -- -- 10,461,209 Balance: May 31, 2009 1,529,550 1,396,644 17,755,631 Adjustment for 1:10 reverse split (4) -- -- Shares issued for cash in October 2009 2,564,108 10,000,021 -- Shares issued for fund raising service in October 2009 408,531 1,573,366 -- Warrants issued for fund raising service in October 2009 -- 262,836 -- Cost of issuance -- (3,230,597) -- Shares issued for cash in March 2010 1,282,091 5,000,153 -- Warrants issued to placement agent -- 183,200 -- Warrants issued to investors -- 1,776,503 -- Cost of issuance -- (2,331,076) -- Shares issued for compensation 7,031,344 27,422,242 -- Stock option expenses -- 199,003 -- Foreign currency translation adjustment -- -- -- Net income (loss) -- -- (13,434,410) Balance: May 31, 2010 12,815,620 $42,252,295 $4,321,221 Accumulated Non Total Other controlling Equity Comprehensive Interests Income Balance: May 31, 2008 $1,306,297 $581,569 $10,550,309 Shares effectively issued to former shareholder as part of the recapitalization on 10/8/2008 -- -- 28,623 Foreign currency translation adjustment 425,654 22,403 448,057 Net income (loss) -- 606,723 11,067,932 Balance: May 31, 2009 1,731,951 1,210,695 22,094,921 Adjustment for 1:10 reverse split -- -- -- Shares issued for cash in October 2009 -- -- 10,000,021 Shares issued for fund raising service in October 2009 -- -- 1,573,366 Warrants issued for fund raising service in October 2009 -- -- 262,836 Cost of issuance -- -- (3,230,597) Shares issued for cash in March 2010 -- -- 5,000,153 Warrants issued to placement agent -- -- 183,200 Warrants issued to investors -- -- 1,776,503 Cost of issuance -- -- (2,331,076) Shares issued for compensation -- -- 27,422,242 Stock option expenses -- -- 199,003 Foreign currency translation adjustment (222,637) (11,486) (234,123) Net income (loss) -- 847,003 (12,587,407) Balance: May 31, 2010 $1,509,314 $2,046,212 $50,129,042 The accompanying notes are an integral part of this statement.
SOURCE China Infrastructure Construction Corporation