China Infrastructure Construction Corporation Reports Unaudited Third Quarter Fiscal Year 2010 Financial Results
BEIJING, April 15 /PRNewswire-Asia-FirstCall/ --
Third Quarter Fiscal Year 2010 Highlights
-- Net revenue decreased 25.96% to $20.25 million year over year
-- Net income decreased 28.24% to $3.23 million year over year
-- *Adjusted net income was $3.29 million compared to $4.50 million year
over year
-- Gross margin was 18.66% compared to 19.06% for the same period last
year
Nine Months Ended Fiscal Year 2010 Highlights
-- Net revenue decreased 4.99% to $51.66 million year over year
-- Net income decreased 333.69% to 19.33 million net loss year over year
-- **Adjusted net income was $8.15 million compared to $ 8.27 million year
over year
-- Gross margin was 20.68% compared to 17.89% for the same period last
year
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 its financial results for the third quarter of its fiscal year 2010 ended February 28, 2010.
"Our third quarter is traditionally the weakest and this year in particular it was negatively affected by the abnormally cold weather and the fact that the entire construction industry closed for a longer period over the Chinese New Year. This impacted both our revenues and profitability," said Mr. Rong Yang, chairman, and chief executive officer of CHNC. "As we left the seasonal impact behind, we have started to experience positive momentum in market demand for our products. Our strategy for continued growth has focused on two primary objectives: accelerating our infrastructure construction business and growing our geographical footprint. Our cooperation with China Railway Construction Group Co., Ltd, signed in December 2009 is a significant development that helps us with both objectives. Our joint operation in Xi'an started production at the end of March and is already contributing to our top and bottom lines. This, combined with our focus on vertical integration to strengthen our competitive advantage within the industry, our cost-cutting and efficiency improvement efforts, has laid a strong foundation to grow sales and profits and insure the company's long-term success."
Financial Summary
Third Quarter Fiscal Year 2010 Results
(In million) other than
EPS Q3 FY2010 Q3 FY2009 Change
(Unaudited) (Unaudited)
Net Revenue $20.25 $27.35 (25.96%)
Gross Profit $3.78 $5.21 (27.55%)
GAAP Net Income (Loss) $3.23 $4.50 (28.24%)
Adjusted Net Income * $3.29 $4.50 (26.95%)
GAAP EPS (Basic and
Diluted) $0.28 $0.29 (3.00%)
Adjusted EPS (Basic and
Diluted) * $0.28 $0.29 (3.00%)
* Adjusted Net Income and Adjusted EPS for three months ended February 28 in fiscal year 2010 are non-GAAP calculations and do not include non-cash, stock-based option expense of $58,030.
Net revenue for the third quarter of the fiscal year 2010 was $20.25 million as compared to $27.35 million in the same period of the last year, reflecting a decrease of $7.10 million or approximately 25.96% year-over-year. The decrease in net revenue is due to the decline of unit prices and the sales volume of concrete products, which was down by approximately 15% for the three months ended February 28, 2010 compared to the same period of the last year. As abnormally cold weather across eastern and central China in this winter greatly affected the construction industry overall, the Company has given a longer Chinese New Year vacation in the Beijing and Tangshan facilities in February this year compared to the last year, resulting in the decrease of the sales during the third quarter of the fiscal year 2010. The raw material prices also experienced a drop in the quarter ended February 28, 2010; as a result, the average unit prices of concrete products decreased approximately 13% as compared to the same period of the last year.
Gross profit for the three months ended February 28, 2010 was $3.78 million, a decrease of $1.44 million or approximately 27.55%, as compared to $5.21 million for the same period of the last year. The decrease in gross profit is attributable to the decrease of the net revenue. Gross profit margin for the three months ended February 28, 2010 was 18.66%, compared to 19.06% for the same period of the last year.
Selling, general and administrative expenses for the three months ended February 28, 2010 were $0.76 million as compared to $0.46 million for the same period of the last year, an increase of $0.30 million or approximately 67.51%. The increase of the selling, general and administrative expenses was primarily due to higher professional fees incurred as a public company such as fees related to legal, auditing, financial reporting and filing. Non-cash stock option expense of $58,030 was recorded.
Operating income for the three months ended February 28, 2010 totaled $3.01 million, a decrease of $1.74 million or approximately 36.64%, as compared to operating income of $4.76 million for the three months ended February 28, 2009. The decrease was mainly due to decreased net revenue and increased professional fees incurred as a public company.
GAAP net income for the three months ended February 28, 2010 was $3.23 million a decrease of $1.27 million or approximately 28.24%, as compared to net income of $4.50 million for the three months ended February 28, 2009. The decrease was mainly a result of decreased net revenue, increased professional fees incurred as a public company and $58,030 non-cash option expense. Net income per share for the third quarter of the fiscal year 2010 was $0.28 (basic and diluted, based on 11.55 million and 11.59 million basic and diluted weighted average shares outstanding), a decrease of $0.01 or approximately 3%, compared to net income per share of $0.29 for the same period of the last year (basic and diluted, based on 15.30 million weighted average shares outstanding).
Adjusted net income, excluding equity compensation expense of $58,030, was $3.29 million for the three months ended February 28, 2010, compared to adjusted net income of $4.50 million for the same period of the last year. Adjusted net income per share for the third quarter of the fiscal year 2010 was $0.28 (basic and diluted, based on 11.55 million and 11.59 million basic and diluted weighted average shares outstanding), a decrease of $0.01 or approximately 3%, compared to the adjusted net income per share of $0.29 the same period of the last year (basic and diluted, based on 15.30 million weighted average shares outstanding).
Nine Months Fiscal Year 2010 Results
Nine Months Nine Months
(In million) other than EPS FY2010 FY2009 Change
(Unaudited) (Unaudited)
Net Revenue $51.66 $54.37 (4.99%)
Gross Profit $10.68 $9.73 (9.83%)
GAAP Net Income (Loss) $(19.33) $8.27 (333.69%)
Adjusted Net Income ** $8.15 $8.27 (1.49%)
GAAP EPS (Basic and Diluted) $(2.97)/(2.96) $0.60 (595.00%)
Adjusted EPS (Basic and
Diluted) $1.25 $0.60 108.33%
** Adjusted Net Income and Adjusted EPS for nine months ended February 28, 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 $58,030.
Net revenue for the nine months ended February 28, 2010 was $51.66 million compared to $54.37 million for the same period of the last year, reflecting a decrease of $2.71 million, or approximately 4.99%. The decrease in net revenue is attributable to the decrease of unit prices as a result of declined raw material prices and decrease of sales volume from concrete products associated with Chinese New Year holiday during the third quarter. The average unit prices of concrete products decreased approximately 5% for the nine months ended February 28, 2010 as compared to the same period of the last year. The sales volume of concrete products for the nine months ended February 28, 2010 remained approximately the same as compared to the same period of the last year.
Gross profit for the nine months ended February 28, 2010 was $10.68 million, an increase of $0.96 million or approximately 9.83%, as compared to $9.73 million for the same period of last year. The increase in gross profit is attributable to the management's stringent cost control of the goods sold. As a result, gross profit margin for the nine months ended February 28, 2010 was 20.68%, compared to 17.89% for the same period of last year.
Selling, general and administrative expenses for the nine months ended February 28, 2010 were $29.95 million, as compared to $0.97 million for the same period of the last year, an increase of $28.98 million, or approximately 3,003.07%. The increase of the selling, general and administrative expenses was primarily due to a one-time non-cash compensation expense of $27.42 million and non-cash stock-based option expense of $58,030.
Our operating loss for the nine months ended February 28, 2010 was $19.26 million, a decrease of $28.02 million or approximately 319.82%, as compared to operating income of $8.76 million for the nine months ended February 28, 2009. The decrease was mainly due to the $27.42 million one-time non-cash stock-based compensation expense and $58,030 of non-cash stock-based option expense included in the selling, general, and administrative expenses. Excluding the non-cash equity compensation charges of $27.42 million and $58,030 of non-cash stock option expense, operating income for the nine months ended fiscal year 2010 would have been $8.22 million with operation margins of 15.91%.
Net loss was $19.33 million for the nine months ended February 28, 2010, compared to net income of $8.27 million for the nine months ended February 28, 2009, a decrease of $27.60 million or approximately 333.69%. The decrease was primarily due to the $27.42 million one-time non-cash stock-based compensation expense and $58,030 of non-cash stock-based option expense included in the selling, general, and administrative expenses. GAAP net loss per share for the nine months ended February 28, 2010 was $2.97 and $2.96 per share (basic and diluted, based on 6.51 million and 6.53 million basic and diluted weighted average shares outstanding), compared with GAAP net income per share of $0.60 (basic and diluted) from the same period of the last year (basic and diluted, based on 13.73 million weighted average shares outstanding).
Adjusted net income, excluding one-time non-cash equity compensation expense of $27.42 million and non-cash stock-based option expense of $58,030, was $8.15 million during the nine months of the fiscal year 2010, compared to adjusted net income of $8.27 million during the same period of the last year. Adjusted net income per share for the nine months of the fiscal year 2010 was $1.25 (basic and diluted, based on 6.51 million and 6.53 million basic and diluted weighted average shares outstanding), an increase of $0.65 or approximately 108.33%, compared to adjusted net income per share of $0.60 the same period of the last year (basic and diluted, based on 13.73 million weighted average shares outstanding).
Financial Condition
As of February 28, 2010, CHNC had cash, cash equivalents and restricted
cash totaling $1.87 million, compared to $0.92 million as of May 31, 2009. The
following table sets forth a summary of our cash flow for the periods
indicated:
Nine Months Ended
February 28,
2010 2009
Net cash provided by (used in) operating
activities $(7,980,858) $10,484)
Net cash used in investing activities (1,209,849) (47,580)
Net cash provided by (used in) financing
activities 10,125,592 (170,866)
Effect of exchange rate change on cash and cash
equivalents 10,691 9,820
Net increase (decrease) in cash and cash
equivalents 945,576 (198,142)
Cash and cash equivalents, beginning balance 921,841 836,978
Cash and cash equivalents, ending balance $1,867,417 $638,836
Net cash used in operating activities was $7.98 million for the nine months ended February 28, 2010, compared to net cash provided by operating activities of $10,484 for the nine months ended February 28, 2009. The decrease of net cash provided by operating activities was due to the increase of trade accounts receivable. The trade accounts receivable increased because of the growing sales. We typically had long-term annual and multi-year contracts with our major customers. We entered into varying payment terms with our customers ranging from payment before delivery, payment on delivery or up to one year after the project completion. As of February 28, 2010, trade accounts receivable with the aging over twelve months old amounted to $1.09 million, representing 2.62% of total trade accounts receivable.
Business Outlook
Mr. Yang concluded, "Looking forward, we are confident that our growth will continue to be solid based on the anticipated benefits of our strategic cooperation agreement with China Railway Construction Group Co., Ltd., the second largest state-owned construction enterprise in the People's Republic of China as well as other business developments. The Chinese government has committed to public infrastructure development of $222.7 billion stimulus money - 38% of the expected total stimulus package - on railways, roads, irrigation and airport construction. Xi'an, the industrial and commercial center of China's northwest, is a key pillar for the implementation of the western development policy and is expected to invest 300 billion RMB annually over the next 10 years on infrastructure construction. Xi'an is poised to become a "super city", increasing to 800 square kilometers from 490 square kilometers with a population of 10 million or more compared to approximately 8.3 million today. The alliance with China Railway Construction Group Co., Ltd. positions us strongly to increase our participation in public infrastructure projects with attractive profitability in Xi'an and beyond.
"Our residential and non residential building projects will also be supported by economic growth and the accelerated urbanization of China which creates robust demand for our concrete products. Our two newly built branch batching stations in Shidu, located within the boundaries of Zhangfang and Beijing Fangshan district, and in Xi'an have begun operations over the past two months and will have a total annual optimum capacity of 1.40 million cubic meters based on historic utilization rates in order to meet the increased market demand."
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 among the few 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 five prime production facilities and eight production lines with a total operation capacity of 4 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 Shidu area, within the boundaries of Zhangfang and Beijing Fangshan district. Two are located in the Tangshan Development Zone, about two hundred kilometers east of Beijing and the fifth 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 three and nine months ended February 28, 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.
Forward-looking Statements
Certain statements made in this news release, may contain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) 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.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 2010 AND MAY 31, 2009
February 28, 2010 May 31, 2009
(UNAUDITED)
Assets
Current assets
Cash and cash equivalents $1,867,417 $921,841
Restricted cash 158,089 --
Trade accounts receivable, net 40,925,026 26,438,106
Inventories 1,975,142 885,834
Total current assets 44,925,674 28,245,781
Property, plant and equipment, net 5,063,711 5,649,835
Other receivables 5,872,791 270,819
Related party receivables -- 674,289
Total other assets 5,872,791 945,108
Total assets $55,862,176 $34,840,724
Liabilities and equity
Current liabilities
Trade accounts payable $10,677,538 $10,173,765
Related party payable 106,280 564,419
Other payables 1,911,563 1,730,290
Current portion of capital lease
obligations 624,678 --
Accrued expenses 287,667 277,329
Bank loan payable 1,466,000 --
Total current liabilities 15,073,726 12,745,803
Long-term liabilities
Long-term portion of capital lease
obligations 834,175 --
Other payables - long-term 802,447 --
Total long-term liabilities 1,636,622 --
Total liabilities 16,710,348 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;
11,555,529 and 1,529,550 shares
issued and outstanding as of
February 28, 2010 and May 31, 2009 37,482,542 1,396,644
Retained earnings (deficit) (1,575,785) 17,755,631
Accumulated other comprehensive
income 1,567,143 1,731,951
Total China Infrastructure
Construction Corporation
stockholders' equity 37,473,900 20,884,226
Noncontrolling interests 1,677,928 1,210,695
Total liabilities and equity $55,862,176 $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 THREE AND NINE MONTHS ENDED FEBRUARY 28, 2010 AND 2009
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
2010 2009 2010 2009
Net Revenue $20,249,742 $27,351,505 $51,660,602 $54,371,630
Cost of goods sold 16,472,119 22,137,655 40,976,286 44,643,940
Gross profit 3,777,623 5,213,850 10,684,316 9,727,690
18.66% 19.06% 20.68% 17.89%
Selling, general and
administrative
expenses 762,894 455,432 29,946,379 965,058
Net operating income
(loss) 3,014,729 4,758,418 (19,262,063) 8,762,632
Other income
(expense):
Interest income
(expense) (92,889) 190 (96,544) 1,133
Other income 498,249 336 503,245 --
Other expense (147) -- (147) (11,930)
Total other income
(expense) 405,213 526 406,554 (10,797)
Net income (loss)
before income taxes 3,419,942 4,758,944 (18,855,509) 8,751,835
Income taxes -- -- -- --
Net income (loss) 3,419,942 4,758,944 (18,855,509) 8,751,835
Less: Net income
attributable to
noncontrolling
interests 191,773 260,606 475,907 479,610
Net income (loss)
attributable to
China Infrastructure
Construction
Corporation $3,228,169 $4,498,338 $(19,331,416) $8,272,225
Earnings (loss) per
share - basic $0.28 $0.29 $(2.97) $0.60
Basic weighted
average shares
outstanding 11,546,195 15,295,500 6,514,531 13,733,189
Earnings (loss) per
share - diluted $0.28 $0.29 $(2.96) $0.60
Diluted weighted
average shares
outstanding 11,587,053 15,295,500 6,527,849 13,733,189
Comprehensive income
Net income (loss) 3,419,942 4,758,944 (18,855,509) 8,751,835
Foreign currency
translation
adjustment 17,787 (7,115) (173,482) 144,748
Comprehensive income
(loss) $3,437,729 $4,751,829 $(19,028,991) $8,896,583
Comprehensive income
attributable to non-
controlling
interests $192,662 $260,250 $467,233 $486,847
Comprehensive income
(loss) attributable
to China
Infrastructure
Construction
Corporation $3,245,067 $4,491,579 $(19,496,224) $8,409,736
The accompanying notes are an integral part of this statement.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2010 AND 2009
(UNAUDITED)
February 28,
2010 2009
Cash flows from operating activities:
Net income (loss) $(18,855,509) $8,751,835
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operations:
Gain from property, plant and
equipment disposal (496,782) --
Bad debt expenses 420,217 --
Depreciation 813,751 523,196
Shares issued for compensation 27,422,242 --
Stock option expenses 58,030 --
Changes in operating liabilities and
assets:
Trade accounts receivable (14,867,003) (14,320,425)
Prepayments -- 195,750
Inventories (1,088,087) 378,188
Other receivables (1,961,370) (1,930,828)
Trade accounts payable 487,288 4,275,748
Other payables 76,478 1,816,538
Accrued expenses 9,887 320,482
Net cash provided by (used in)
operating activities (7,980,858) 10,484
Cash flows from investing activities:
Property, plant, and equipment
additions (1,209,849) (47,580)
Proceeds from related party
receivable -- --
Net cash used in investing activities (1,209,849) (47,580)
Cash flows from financing activities:
Shares issued for cash 8,605,626 --
Restricted cash (158,089) --
Bank loan payable 1,466,300 --
Proceeds from related party payable 211,755 --
Payments to related party payable -- (199,489)
Cash acquired in recapitalization -- 28,623
Net cash provided by (used in)
financing activities 10,125,592 (170,866)
Effect of rate changes on cash 10,691 9,820
Increase (decrease) in cash and cash
equivalents 945,576 (198,142)
Cash and cash equivalents, beginning
of period 921,841 836,978
Cash and cash equivalents, end of
period $1,867,417 $638,836
Supplemental disclosures of cash flow
information:
Interest paid in cash $94,159 $--
Income taxes paid in cash $-- $--
Non-cash investing activities:
Acquisition of property, plant and
equipment through other payable $2,261,763 $--
Disposal of property, plant and
equipment through other receivable $3,808,660 $--
Related party receivable offset by
payable to related party payable $674,289 $--
The accompanying notes are an integral part of this statement.
For more information, please contact:
Melody Shi
Chief Financial Officer
China Infrastructure Construction Corporation
Tel: +1-949-468-7078 (US)
+86-136-2106-6511 (China)
Email: [email protected]
IR Contact
Thomas A. Myers
Christensen Investor Relations
Tel: +86-139-1141-3520 (China)
Email: [email protected]
Kathy Li
Christensen Investor Relations
Tel: +1-480-614-3036
Email: [email protected]
SOURCE China Infrastructure Construction Corporation
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