RINO Announces Second Quarter 2010 Financial Results
60.6% year-over-year total revenue increase
80.5% year-over-year operating profit increase
DALIAN, China, Aug. 16 /PRNewswire-Asia-FirstCall/ -- RINO International Corporation (the "Company" or "RINO") (Nasdaq: RINO), a leading provider of clean technology solutions to China's iron and steel industry, announced today its unaudited financial results for the second quarter ended June 30, 2010.
Second Quarter Highlights
-- Total revenues in the second quarter of 2010 were $65.4 million, a
60.6% increase from the corresponding period in 2009.
-- Operating profit in the second quarter of 2010 was $18.1 million, a
80.5% increase from the corresponding period in 2009.
-- Net income in the second quarter of 2010 was $20.4 million, a 107.4%
increase from the corresponding period in 2009. Net income excluding
change in fair value of warrant (non-GAAP) was $15.5 million, a 33.0%
increase from the corresponding period in 2009.
-- Diluted earnings per share ("EPS") for the second quarter of 2010 was
$0.71. Diluted EPS excluding change in fair value of warrant (non-GAAP)
was $0.54, a 16.6% increase from $0.47 for the corresponding period in
2009.
"We are pleased to announce strong results for the second quarter 2010," said Mr. Dejun Zou, director and chief executive officer of RINO. "The robust year-over-year revenue increase was primarily driven by steady growth in our two main business segments, core flue gas desulphurization and waste water treatment systems. Going forward, the primary objective for our core business segments is to continue expanding our market share and enhance gross margin. At the same time, we will build out other business segments that are synergistic extensions of our core competence. Municipal sludge treatment, for instance, is an area of our near-term focus."
"China's clean technology industry is growing rapidly with government support. Policies and guidelines that call for increasingly stricter standards for industrial waste treatment continuously drive up demand for a greater scope of treatments as well as volume. RINO's future success depends on our ability to continue enhancing our production capacity and technological capability to keep up with industry developments. We are confident that with our focused efforts on these fronts and effective execution we will continue to be a leading player in the industry of our fundamental business segments and successfully expand into high growth segments in the future," Mr. Zou concluded.
Mr. Ben Wang, chief financial officer of RINO, added, "Both top and bottom line results were very strong in the second quarter and we are on track to achieve our targets for fiscal year 2010. For the rest of the year we will continue to enhance operational systems while investing for sustainable growth in the long term. We are also progressing according to our schedule to further strengthen our internal control and to continue to comply with Sarbanes Oxley requirements."
2010 Second Quarter Results
RINO reported total revenues of $65.4 million for the second quarter of 2010, representing a 60.6% increase from the corresponding period in 2009. Revenue growth was driven by the continued growth across the Company's major product lines. Specifically, the Company recorded $42.4 million in revenues from the desulphurization business, an increase of 41.0% from $30.1million in the same period of 2009; $15.0 million from wastewater treatment system sales, an increase of 61.7% over the second quarter of 2009; and $7.1 million in anti-oxidation equipment and coatings as compared to $1.1 million recorded in the same period of 2009.
Cost of sales for the second quarter of 2010 was $42.3 million as compared to $26.6 million in the same quarter of 2009, an increase of 59.3%. Gross profit was $23.1 million in the second quarter of 2010 compared to $14.2 million for the same period of 2009, an increase of 62.9%, and representing gross margins of 35.3% and 34.8%, respectively. The Company expects gross margin to be in the mid thirties range for the remainder of the year. Outsourcing costs for the second quarter 2010 were $4.3 million, an increase of 2745% from $0.2 million in the same period of 2009.
Total operating expenses for the second quarter of 2010 were $5.0 million as compared to $4.2 million for the same period in 2009. The increase in operating expenses was primarily due to increased sales commissions associated with the increased volume of contracts. Operating margin was 27.6% for the second quarter of 2010 as compared to 24.6% for the second quarter of 2009. The fluctuation in operating margins is associated with sales commissions being paid upon contract signing, while contract revenues are recognized in stages during the project using the percentage-of-completion method.
Share-based compensation expenses, which were allocated to the related operating costs and expenses line items, increased in aggregate to $46,036 in the second quarter of 2010 from $9,263 in the corresponding period in 2009. The increase in share-based compensation expenses was primarily due to additional options granted to staff and a board member.
Income tax expense provision was $2.5 million, or $0.09 per share, for the second quarter of 2010, compared to nil in the same period in 2009. The Company's effective tax rate for 2010 is 10.9% compared to 0% for 2009.The increase in effective tax rate was primarily due to Dalian Innomind Environment Engineering Co., Ltd., a wholly owned subsidiary of the Company, reaching the end of its tax-free holiday and entering a phase in which it is subject to a fifty percent tax shelter (12.5%) for the years of 2010, 2011and 2012.
Net income for the second quarter of 2010 was $20.4 million, representing an increase of 107.4% as compared to $9.9 million reported in the same period in the prior year. Diluted earnings per share were $0.71 for the second quarter of 2010 as compared to $0.39 for the same period last year, based on 28.6 million and 25.1 million weighted average shares outstanding, respectively. Non-GAAP net income, which is net income excluding a $4.9 million gain from the change in the fair value of warrants for the second quarter of 2010, was $15.5 million, translating to non-GAAP diluted EPS of $0.54.
Balance Sheet and Cash Flow Discussion
Cash and cash equivalents as of June 30, 2010 were $88.0 million, representing a decrease of 34.5% as compared to $134.5 million as of December 31, 2009. At the end of the second quarter, the Company had working capital of $245.2 million and a current ratio of 11 to 1.
Accounts receivable stood at $68.4 million, an 18.3% increase from $57.8 million reported as of December 31, 2009. Days sales outstanding for the first two quarters of 2010 was 102 days compared with 124 days for the same period of 2009. As of June 30, 2010, the Company had $8.1 million in long-term loans and $3.7 million in short term loans. Stockholder's equity increased 19.8% to $244.5 million as of June 30, 2010 as compared to $204.2 million as of December 31, 2009.
For the first six months of 2010, cash used in operations totaled $48.3 million as compared to $9.7 million cash provided by operations for the first six months of 2009, mainly due to an increase in advances for inventory purchases to support additional projects, an increase in costs and estimated earnings in excess of billings on uncompleted contracts, and change in fair value of warrants.
Backlog as of June 30, 2010
Backlog, defined as projects for which contracts have been signed but which have not been completed or started, as of June 30, 2010 was $104.7 million. The Company expects that approximately 50% of the currently backlogged contracts will be executed and recognized as revenue by the end of the third quarter, 2010.
Product Segment Amount ($ millions)
1. Desulphurization Systems 70.8
2. Wastewater Treatment 14.6
3. Anti-oxidation Systems 0.4
4. Municipal Sludge Treatment 18.9
Total 104.7
Recent Business Updates
Approval for new bank loan
In August 2010, RINO received a letter of approval from the Agricultural Bank of China for a business loan in the amount of $ 44.2 million (RMB 300 million) to be used to purchase fixed assets. The Company plans to use funding from this loan for the Changxing Island Project as needed.
Outlook for Fiscal Year 2010
RINO continues to expect to generate total revenues in an amount ranging from $221.0 million to $229.0 million for fiscal year 2010, representing an increase of 15% - 19% from 2009. This forecast reflects RINO's current and preliminary view, which will be subject to future changes.
Conference Call Information
RINO's management will host an earnings conference call at 8 AM on August 17, 2010 U.S. Eastern Time (8 PM on August 17, 2010 Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as follows:
International: +1-857-350-1602
US: +1-866-783-2143
UK: +44-207-365-8426
Hong Kong: +852-3002-1672
Passcode: 90238159
A replay of the conference call may be accessed by phone at the following number until August 25, 2010:
International: +1-617-801-6888
US: +1-888-286-8010
Passcode: 52332473
Additionally, a live and archived webcast of this conference call will be available at http://ir.stockpr.com/rinointernational/ .
About RINO International Corporation
RINO International Corporation is a leading provider of clean technology solutions to China's iron and steel industry. RINO designs, manufactures, installs and services an extensive suite of products and solutions, including its patented wastewater treatment, flue gas desulphurization, high temperature anti-oxidation and sludge treatment systems, to a large customer base with the aim to reduce industrial pollution and improve energy utilization in China. With strong research and development capabilities, RINO has two patents related to wastewater treatment, ten patents under application and an invention patent for its anti-oxidation technology under the International Patent Corporation Treaty as of May 2010. For additional investor information, please visit http://ir.stockpr.com/rinointernational/ .
Cautionary Statement Regarding Forward-Looking Information
Certain statement in this press release may contain forward-looking information about the Company. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and statements which may include discussions of strategy, and statements about industry trends future performance, operations and products of each of the entities referred to above. Actual performance results may vary significantly from expectations and projections as a result of various factors, including without limitation and the risks set forth "Risk Factors" contained in the Company's Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q.
About Non-GAAP Financial Measures
The management of RINO International Corporation (herein "RINO") uses non- GAAP adjusted net earnings to measure the performance of the Company's business internally by excluding non-recurring items as well as special non- cash charges. The Company's management believes that these non-GAAP adjusted financial measures allow the management to focus on managing business operating performance because these measures reflect the essential operating activities of RINO and provide a consistent method of comparison to historical periods. The Company believes that providing the non-GAAP measures that management uses internally to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand RINO's financial performance in comparison to historical periods without variations caused by non-recurring items and non- operating related charges. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by the 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 GAAP financial measure. However, the management of RINO compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides the non-GAAP financial measures and the related GAAP measures and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.
Q2 2010 Q2 2009
GAAP Net Income $ 20,436,248 $ 9,855,284
Change in fair value of warrants $ 4,889,118 $ (1,833,745)
Adjusted Net Income $15,547,130 $ 11,689,029
Adjusted EPS (Diluted) $ 0.54 $ 0.47
For more information, please contact:
In China:
Mr. Ben Wang
Chief Financial Officer
RINO International Corporation
Tel: +86-411-8766-1828
Email: [email protected]
Ms. Cynthia He
Brunswick Group LLP
Tel: +86-10-6566-2256
Email: [email protected]
In the U.S.:
Ms. Cindy Zheng
Brunswick Group LLP
Tel: +1-212-333-3810
Email: [email protected]
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
2010 2009
A S S E T S
CURRENT ASSETS
Cash and cash equivalents $88,036,608 $134,487,611
Restricted cash 3,388,392 --
Notes receivable 469,960 440,100
Due from shareholders -- 3,005,386
Accounts receivable, trade, net
of allowance for doubtful
accounts of $562,822 and
$273,446 as of June 30, 2010
and December 31, 2009,
respectively 68,389,279 57,811,171
Costs and estimated earnings in
excess of billings on
uncompleted contracts 38,902,971 3,258,806
Inventories 4,401,228 5,405,866
Advances for inventory
purchases 64,425,996 34,056,231
Other current assets and
prepaid expenses 879,076 629,506
Total current assets 268,893,510 239,094,677
PLANT AND EQUIPMENT, NET 13,020,836 12,265,389
OTHER ASSETS
Investment in unconsolidated
affiliate 441,900 --
Advances for non current assets 9,492,531 6,570,378
Intangible assets, net 9,026,114 1,144,796
Total other assets 18,960,545 7,715,174
Total assets $300,874,891 $259,075,240
L I A B I L I T I E S A N D
S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $7,202,192 $4,281,353
Short term bank loans 3,682,500 1,467,000
Notes payable 3,388,392 --
Billings in excess of costs and
estimated earnings on
uncompleted contracts 3,385,163 --
Customer deposits 351,630 4,984,801
Deferred revenue 1,333,127 --
Liquidated damages payable 20,147 20,147
Due to shareholders 535,895 --
Taxes payable 3,261,799 4,003,709
Other payables and accrued
liabilities 508,564 496,411
Total current liabilities 23,669,409 15,253,421
Long-term loan 8,101,500 --
Warrant Liabilities 97,798 15,172,712
REDEEMABLE COMMON STOCK ($0.0001 par
value, 5,464,357 shares issued with
conditions for redemption outside
the control of the company) 24,480,319 24,480,319
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock ($0.0001 par
value, 50,000,000 shares
authorized, none issued and
outstanding) -- --
Common Stock ($0.0001 par
value, 100,000,000 shares
authorized, 28,605,321 and
28,603,321 shares issued and
outstanding as of June 30,
2010 and December 31, 2009) 2,860 2,860
Additional paid-in capital 107,201,125 107,135,593
Retained earnings 115,517,443 78,983,794
Statutory reserves 14,314,417 11,755,312
Accumulated other comprehensive
income 7,490,020 6,291,229
Total shareholders'
equity 244,525,865 204,168,788
Total liabilities
and shareholders'
equity $300,874,891 $259,075,240
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
2010 2009 2010 2009
REVENUES
Contracts $64,496,123 $40,469,182 $112,263,690 $75,835,318
Services 887,545 253,068 979,225 495,051
65,383,668 40,722,250 113,242,915 76,330,369
COST OF SALES
Contracts 41,638,121 26,123,509 72,613,173 45,249,005
Services 494,649 268,912 494,649 592,830
Depreciation 170,767 162,260 355,442 370,327
42,303,537 26,554,681 73,463,264 46,212,162
GROSS PROFIT 23,080,131 14,167,569 39,779,651 30,118,207
OPERATING EXPENSES
Selling, general
and administrative
expenses 4,958,664 4,146,294 11,771,338 7,517,018
Stock compensation
expense 46,036 9,263 65,532 9,263
TOTAL OPERATING
EXPENSES 5,004,700 4,155,557 11,836,870 7,526,281
INCOME FROM
OPERATIONS 18,075,431 10,012,012 27,942,781 22,591,926
OTHER INCOME
(EXPENSES), NET
Other expense, net -110,664 3,871 -113,879 -5,779
Change in fair
value of warrants 4,889,118 -1,833,745 15,074,914 -1,810,134
Interest income
(expense), net 70,162 -72,974 140,444 -191,933
Gain on liquidated
damage settlement -- 1,746,120 -- 1,746,120
TOTAL OTHER INCOME
(EXPENSES), NET 4,848,616 -156,728 15,101,479 -261,726
INCOME BEFORE
PROVISION FOR
INCOME TAXES 22,924,047 9,855,284 43,044,260 22,330,200
PROVISION FOR
INCOME TAXES 2,487,799 -- 3,951,506 --
NET INCOME 20,436,248 9,855,284 39,092,754 22,330,200
OTHER COMPREHENSIVE
INCOME (LOSS):
Foreign currency
translation
adjustment 1,065,043 -10,019 1,198,791 -137,639
COMPREHENSIVE
INCOME $21,501,291 $9,845,265 $40,291,545 $22,192,561
WEIGHTED AVERAGE
NUMBER OF SHARES:
Basic 28,603,517 25,070,356 28,603,431 25,055,668
Diluted 28,609,452 25,070,940 28,610,245 25,055,668
EARNINGS PER SHARE:
Basic $0.71 $0.39 $1.37 $0.89
Diluted $0.71 $0.39 $1.37 $0.89
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock
Par Value $0.0001 Retained
Additional Earnings
Number Common Paid-in Unrestricted
of shares stock capital earnings
BALANCE, January 31, 2009 $25,040,000 $2,504 $25,924,007 $28,570,948
Cumulative effect of
reclassification of
warrants -- -- -1,058,702 -420,070
Shares issued to settle
liquidated damage payable 48,438 5 216,999 --
Stock issued for service 2,000 -- 8,960 --
Imputed interest on
advances from a shareholder -- -- 13,557 --
Net income -- -- -- 22,330,200
Allocation to statutory
reserve -- -- -- -2,477,427
Foreign currency
translation gain -- -- -- --
BALANCE, June 30, 2009
(Unaudited) $25,090,438 $2,509 $25,104,821 $48,003,651
Stock compensation expense -- -- 38,425 --
Non cash exercise of
warrant at $5.38 260,851 26 5,881,081 --
Stock issuance for cash
for $30.75 3,252,032 325 76,111,266 --
Net income -- -- -- 34,061,550
Allocation to statutory
reserve -- -- -- -3,081,407
Foreign currency
translation gain -- -- -- --
BALANCE, December 31,
2009 $28,603,321 $2,860 $107,135,593 $78,983,794
Stock compensation
expense 2,000 -- 65,532 --
Net income -- -- -- 39,092,754
Allocation to statutory
reserve -- -- -- -2,559,105
Foreign currency
translation gain -- -- -- --
BALANCE, June 30, 2010
(Unaudited) 28,605,321 2,860 107,201,125 115,517,443
Accumulated
other
Statutory comprehensive
reserve income Totals
BALANCE, January 31, 2009 $6,196,478 $6,221,943 $66,915,880
Cumulative effect of
reclassification of
warrants -- -- -1,478,772
Shares issued to settle
liquidated damage payable -- -- 217,004
Stock issued for service -- -- 8,960
Imputed interest on
advances from a
shareholder -- -- 13,557
Net income -- -- 22,330,200
Allocation to statutory
reserve 2,477,427 -- --
Foreign currency
translation gain -- -137,639 -137,639
BALANCE, June 30, 2009
(Unaudited) $8,673,905 $6,084,304 $87,869,190
Stock compensation expense -- -- 38,425
Non cash exercise of
warrant at $5.38 -- -- 5,881,107
Stock issuance for cash
for $30.75 -- -- 76,111,591
Net income -- -- 34,061,550
Allocation to statutory
reserve 3,081,407 -- --
Foreign currency
translation gain -- 206,925 206,925
BALANCE, December 31,
2009 $11,755,312 $6,291,229 $204,168,788
Stock compensation expense -- -- 65,532
Net income -- -- 39,092,754
Allocation to statutory
reserve 2,559,105 -- --
Foreign currency
translation gain -- 1,198,791 1,198,791
BALANCE, June 30, 2010
(Unaudited) 14,314,417 7,490,020 244,525,865
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $39,092,754 $22,330,200
Adjustments to reconcile
net income to cash (used in)
provided by operating
activities:
Depreciation 466,837 478,251
Amortization 86,273 33,377
Allowance for bad
debt 287,064 205,687
Imputed interest
on advances from
shareholders -- 13,556
Amortization of
long term
prepaid expenses 39,166 7,329
Stock issued for
services -- 9,263
Stock
compensation
expense and
shares placed in
escrow 65,532 --
Gain (expense) on
Liquidated
damage
settlement -- -1,746,120
Change in fair
value of
warrants -15,074,914 1,810,134
Changes in operating
assets and
liabilities:
Notes receivable -27,944 806,516
Accounts
receivable -10,585,899 -21,802,792
Costs and
estimated
earnings in
excess of
billings on
uncompleted
contracts -35,483,281 --
Inventories 1,022,495 81,194
Advances for
inventory
purchases -30,105,286 6,308,955
Other current
assets and
prepaid expenses -246,017 -131,544
Accounts payable 2,891,305 -823,508
Customer deposits -4,634,288 -3,549,925
Billings in
excess of costs
and estimated
earnings on
uncompleted
contracts 3,371,144 --
Other payables
and accrued
liabilities 10,077 -329,915
Deferred revenue 1,327,607 --
Taxes Payable -755,144 6,038,867
Net cash
(used in)
provided by
operating
activities -48,252,519 9,739,525
CASH FLOWS FROM INVESTING
ACTIVITIES
Payment for
investment in
unconsolidated
affiliate -440,070 --
Purchase of equipment -1,169,547 -28,051
Advances for non
current assets -2,922,462 --
Purchase of
intangible assets -7,930,290 --
Net cash used in
investing
activities -12,462,369 -28,051
CASH FLOWS FROM FINANCING
ACTIVITIES
Change in restricted
cash -3,374,360 1,030,317
Proceeds from notes
payable - banks 3,374,360 88,382
Proceeds from short
term bank loans 3,667,250 21,985,500
Payments on short
term bank loans -1,466,900 --
Payments on
liquidated damage
settlement -- -615,018
Payment on due to
shareholder -321,810 -824,808
Proceeds from
shareholder 3,862,842 668,449
Proceeds from long
term bank loans 8,067,950 --
Net cash provided
by financing
activities 13,809,332 22,332,822
EFFECT OF EXCHANGE RATE
ON CASH 454,553 -42,094
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS -46,451,003 32,002,202
CASH AND CASH
EQUIVALENTS, beginning 134,487,611 19,741,982
CASH AND CASH
EQUIVALENTS, ending $88,036,608 $51,744,184
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Cash paid for
Interest expense $206,830 $369,146
Cash paid for income
taxes $2,388,504 $229,848
SOURCE RINO International Corporation
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