DALIAN, China, May 17 /PRNewswire-Asia-FirstCall/ -- RINO International Corp. (Nasdaq: RINO), which through its subsidiaries and controlled affiliates (collectively, the "Company" or "RINO"), designs, manufactures, installs and services proprietary and patented wastewater treatment, desulphurization equipment, and high temperature anti-oxidation systems for iron and steel manufacturers in the People's Republic of China ("PRC"), today announced the Company's financial results for the first quarter of 2010.
Summary Financials First Quarter Results (Unaudited) Q1 2010 Q1 2009 CHANGE Sales $47.9 million $35.6 million + 34.4% Gross Profit $16.7 million $16.0 million + 4.7% Provision for Income Taxes $1.5 million(1) N/A GAAP Net Income $18.7 million $12.5 million + 49.6% Adjusted Net Income $8.5 million(2) $12.5 million(3) - 31.8% GAAP EPS (Diluted) $0.65 $0.50 + 30.0% Adjusted EPS (Diluted) $0.30(2) $0.50(3) - 40.0% (1) The Company's effective tax rate for 2010 is 7.3% and created a provision of $1.5 million, or $.05 per share for Q1 2010 vs. none in the same period in 2009. (2) Excludes non-cash gain of $10.2 million related to the change in fair value of warrants and non-cash charge of $19,496 for stock compensation expense. (3) Excludes non-cash gain of $23,611 related to the change in fair value of warrants.
2010 First Quarter Financial Results
Net revenues for the first quarter ended March 31, 2010 increased 34.4% to $47.9 million as compared to $35.6 million for the first quarter in 2009. Revenue growth was driven by continued growth in demand across its three major product lines. Specifically, the Company recorded $33.9 million in desulphurization revenues, an increase of 32.0% from $25.7 million in same period 2009, with $4.8 million related to the Huanan Lianyuan DXT project; $10.8 million in wastewater treatment system sales, an increase of 49.1% over the first quarter in 2009; and $3.0 million in anti-oxidation equipment and coatings as compared to $2.4 million recorded in the same period in 2009.
Cost of sales for the first quarter of 2010 was $31.2 million as compared to $19.7 million in same period 2009, an increase of 58.5%. Gross profit was $16.7 million in the first quarter of 2010 as compared to $16.0 million for the same period in 2009, an increase of $0.7 million or 4.7%, representing gross margins of approximately 34.9% and 44.8%, respectively. The decrease in gross margins was due to increased steel costs, in addition to higher levels of outsourced production during the first quarter to meet project implementation timelines. The Company incurred $5.8 million in outsourcing expense for the three months ended March 31, 2010 as compared to $0.9 million in the same period in 2009.
Total operating expenses for the first quarter of 2010 were $6.8 million as compared to $3.4 million for the same period in 2009. The increase in operating expenses was primarily due to increased sales commissions associated with larger contracts. Operating margins were 20.6% for the first quarter of 2010 as compared to 35.3% for the first quarter of 2009.
The Company's effective tax rate for 2010 is 7.3%, resulting in a provision of $1.5 million, or $.05 per share, for the first quarter of 2010, compared to none in the same period in 2009.
GAAP net income for the first quarter of 2010 was $18.7 million, representing an increase of 49.6% as compared to $12.5 million reported in the same period in the prior year. GAAP earnings were $0.65 per diluted share for the first quarter of 2010 as compared to $0.50 per diluted share for the same period last year, based on 28.6 million and 25.0 million weighted average shares outstanding, respectively. Excluding a $10.2 million gain for the change in the fair value of warrants and $19,496 stock compensation expense for the first quarter of 2010, adjusted net income (Non-GAAP) was $8.5 million, with adjusted earnings per diluted share of $0.30.
"During the first quarter of 2010, we delivered measured revenue growth through the execution of several major projects, including both desulphurization and wastewater treatment systems," commented Mr. Zou Dejun, President and CEO of RINO International. "We are pleased with the momentum in our business as evidenced by our backlog and expect a robust second half of the year as the State Environmental Protection Agency (SEPA) maintains a supportive policy to reduce the sulphur emissions for iron and steel producers, while aging wastewater infrastructure systems force prospective customers to accelerate purchase decisions. We are confident in meeting our projects for $225 million in revenue for 2010, representing 17% growth over 2009.
Increased demand for company resources, coupled with capacity constraints led to more outsourcing during the first quarter which compressed margins, but our prudent cost management kept gross margins within the Company's target of 35% to 40%. In addition, RINO incurred significantly higher sales commissions due to a larger number of contracts and higher associated fees due to higher average contract price. Construction commenced on a new large scale industrial production facility on the 57.5 acres we recently secured in Dalian Changxing Island Harbor Industrial Zone. This facility will be used to expand the Company's manufacturing capacity by over 300% and R&D capabilities for our entire line of environmental protection equipment and is expected to come on-line in phases commencing September 2010 and to be completed by May 2011.
During the first quarter, we began the installation for the Company's first BOT desulphurization project with Shougang Jingtang Steel Company, continued the DXT desulphurization system installation for Hunan Lianyuan Iron and Steel Company and commenced construction of the sludge treatment facility for the city of Dalian."
"With the proceeds from the $100 million equity financing in December, we have the necessary working capital to expand our production capacity while leveraging incremental working capital to secure additional projects as demand continues to be driven by environmental and regulatory trends and economic growth in China," Mr. Zou concluded.
Balance Sheet and Cash Flow Discussion
Cash and cash equivalents as of March 31, 2010 were $97.7 million, representing a decrease of 27.4% as compared to $134.5 million as of December 31, 2009. At the end of the quarter the Company had working capital of 231.8 million and a current ratio of 7.1 to 1. Accounts receivable stood at $52.3 million, a 9.6% decrease from $57.8 million reported as of December 31, 2009. Days sales outstanding stood at 105 compared to 104 at the end of last year. As of March 31, 2010, the Company had $8.1 million in long-term loans and $3.7 million in short term loans. Stockholder's equity increased 9.2% to $223.0 million as of March 31, 2010 as compared to $204.2 million as of December 31, 2009.
For the first quarter in 2010, cash used in operations totaled $38.2 million as compared to $27.6 million cash provided by operations for the first quarter in 2009, which was mainly due to an increase in advances for inventory purchases to support additional projects and an increase in costs and estimated earnings in excess of billings on uncompleted contracts.
Backlog as of March 31, 2010
Backlog, defined as unfinished projects, as of March 31, 2010 was $110.5 million with the breakdown detailed in the table below. The Company expects that 50% of this will turn into revenue by the end of the second quarter.
Product Segment Amount ($ millions) 1. Desulphurization Systems 67.7 2. Wastewater Treatment 22.3 3. Anti-oxidation Systems 1.8 4. Municipal Sludge Treatment 18.7 Total 110.5 Recent Events -- On May 10 Mr. Zou and Ms. Qiu repaid the $3.5 million short-term loan plus interest which was made on March 31, 2010. -- On May 3 the Company appointed Mr. Ben Wang as Chief Financial Officer and Mr. Harold Epps as Chief Strategic Officer to assist with the international growth plan.
The Company will host a conference call on May 17, 2010, at 9:00 a.m. ET. To attend the call, please use the dial information below. When prompted, ask for the "RINO International Call" and/or be prepared to provide the conference ID.
Date: May 17, 2010 Time: 9:00am ET Conference Line Dial-In (U.S.): +1-888-846-5003 International Dial-In: +1-480-629-9856 Conference ID: 4302354 Webcast link: http://viavid.net/dce.aspx?sid=00007583
Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through May 24th, 2009. To listen, please call +1-800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 4302354 for the replay.
About RINO International Corporation
RINO International Corporation, through its direct and indirect subsidiaries, including Innomind Group Limited and Dalian Innomind Environment Engineering Co., Ltd., its contractually-controlled affiliate, Dalian RINO Environmental Engineering Science and Technology Co., Ltd. ("Dalian Rino") and Dalian Rino's wholly-owned subsidiaries, Dalian Rino Environmental Engineering Project Design Co., Ltd. and Dalian Rino Environmental Construction & Installation Project Co., Ltd., is a leading provider of environmental protection equipment for the iron and steel industry in China. Specifically, RINO designs, manufactures, installs and services proprietary and patented wastewater treatment, flue gas desulphurization equipment, and high temperature anti-oxidation systems, which are all designed to reduce either industrial pollution and/or improve energy utilization. RINO's manufacturing facility maintains the ISO 9001 Quality Management System and ISO 14001 Environment Management System certifications, in addition to receiving numerous government and industry awards.
Additional information about the Company is available at the Company's website: http://www.rinogroup.com .
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, Quarterly Reports on Form 10-Q.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP net income, and non-GAAP EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results," meaning our operating performance excluding not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure. Q1 2010 Q1 2009 GAAP Net Income $18,656,506 $12,474,916 Stock compensation expense $19,496 -- Change in fair value of warrants $(10,185,796) $(23,611) Adjusted Net Income $8,490,206 $12,451,305 Adjusted EPS (Diluted) $0.30 $0.50 For more information, please contact: For the Company: Ben Wang Tel: +86-411-8766-2700 Email: [email protected] Harold Epps Tel: +1-949-888-6630 Email: [email protected] Investors: Matt Hayden HC International, Inc. Tel: +1-561-245-5155 Email: [email protected] Financial Statements Follow RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2010 AND DECEMBER 31, 2009 2010 2009 (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $97,659,037 $134,487,611 Restricted cash 3,806,131 -- Notes receivable 539,929 440,100 Loan to shareholders 3,074,748 3,005,386 Accounts receivable, trade, net of allowance for doubtful accounts of $477,303 and $273,446 as of March 31, 2010 and December 31, 2009, respectively 52,257,896 57,811,171 Costs and estimated earnings in excess of billings on uncompleted contracts 24,417,688 3,258,806 Inventories 2,217,412 5,405,866 Advances for inventory purchases 84,358,237 34,056,231 Other current assets and prepaid expenses 1,457,815 629,506 Total current assets 269,788,893 239,094,677 PLANT AND EQUIPMENT, NET 12,881,407 12,265,389 OTHER ASSETS Investment in unconsolidated affiliate 440,100 -- Advances for non current assets 14,257,458 6,570,378 Intangible assets, net 1,131,759 1,144,796 Total other assets 15,829,317 7,715,174 Total assets $298,499,617 $259,075,240 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $10,894,287 $4,281,353 Short term bank loans 3,667,500 1,467,000 Notes payable 3,806,131 -- Billings in excess of costs and estimated earnings on uncompleted contracts 5,499,543 -- Customer deposits 5,587,565 4,984,801 Liquidated damages payable 20,147 20,147 Taxes payable 8,048,485 4,003,709 Other payables and accrued liabilities 461,686 496,411 Total current liabilities 37,985,344 15,253,421 Long-term loan 8,068,500 -- Warrant Liabilities 4,986,916 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, 10,000,000,000 shares authorized, 28,603,321 shares issued and outstanding as of March 31, 2010 and December 31, 2009) 2,860 2,860 Additional paid-in capital 107,155,089 107,135,593 Retained earnings 96,760,779 78,983,794 Statutory reserves 12,634,833 11,755,312 Accumulated other comprehensive income 6,424,977 6,291,229 Total shareholders' equity 222,978,538 204,168,788 Total liabilities and shareholders' equity $298,499,617 $259,075,240 RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED) 2010 2009 REVENUES Contracts $47,767,567 $35,366,136 Services 91,680 241,983 47,859,247 35,608,119 COST OF SALES Contracts 30,975,052 19,125,496 Services -- 323,918 Depreciation 184,675 208,067 31,159,727 19,657,481 GROSS PROFIT 16,699,520 15,950,638 OPERATING EXPENSES Selling, general and administrative expenses 6,812,674 3,370,724 Stock compensation expense 19,496 -- TOTAL OPERATING EXPENSES 6,832,170 3,370,724 INCOME FROM OPERATIONS 9,867,350 12,579,914 OTHER INCOME (EXPENSES), NET Other expense, net (3,215) (9,650) Change in fair value of warrants 10,185,796 23,611 Interest income (expense), net 70,282 (118,959) TOTAL OTHER INCOME (EXPENSES), NET 10,252,863 (104,998) INCOME BEFORE PROVISION FOR INCOME TAXES 20,120,213 12,474,916 PROVISION FOR INCOME TAXES 1,463,707 -- NET INCOME 18,656,506 12,474,916 OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation adjustment 133,748 (127,620) COMPREHENSIVE INCOME $18,790,254 $12,347,296 WEIGHTED AVERAGE NUMBER OF SHARES: Basic 28,603,321 25,040,000 Diluted 28,603,321 25,040,000 EARNINGS PER SHARE: Basic $0.65 $0.50 Diluted $0.65 $0.50 RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED) 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES Net income $18,656,506 $12,474,916 Adjustments to reconcile net income to cash (used in) provided by operating activities: Depreciation 226,768 256,334 Amortization 13,033 16,682 Allowance for bad debt 203,788 -- Imputed interest on advances from shareholders -- 5,375 Amortization of long term prepaid expenses 19,577 3,663 Stock compensation expense and shares placed in escrow 19,496 -- Change in fair value of warrants (10,185,796) (23,611) Changes in operating assets and liabilities: Notes receivable (99,795) (325,709) Accounts receivable 5,347,594 12,355,675 Costs and estimated earnings in excess of billings on uncompleted contracts (21,151,670) -- Inventories 3,187,367 (114,388) Advances for inventory purchases (50,284,861) (3,311,177) Other current assets and prepaid expenses (828,027) (47,284) Accounts payable 6,610,680 (2,570,517) Billings in excess of costs and estimated earnings on uncompleted contracts 5,497,669 -- Customer deposits 602,559 6,272,826 Taxes payable 4,043,397 2,915,291 Other payables and accrued liabilities (34,713) (337,742) Net cash (used in) provided by operating activities (38,156,428) 27,570,334 CASH FLOWS FROM INVESTING ACTIVITIES Payment for investment in unconsolidated affiliate (440,100) -- Purchase of equipment (822,503) (20,789) Advances for non current assets (7,704,037) -- Net cash used in investing activities (8,966,640) (20,789) CASH FLOWS FROM FINANCING ACTIVITIES Change in restricted cash (3,804,834) 1,030,317 Proceeds from notes payable - banks 3,804,834 -- Proceeds from short-term bank loans 2,199,750 -- Proceeds from long-term loan 8,065,750 -- Payment to shareholders (291,234) (380,650) Proceeds from shareholder 221,844 -- Net cash provided by financing activities 10,196,110 649,667 EFFECT OF EXCHANGE RATE ON CASH 98,384 (28,747) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (36,828,574) 28,170,465 CASH AND CASH EQUIVALENTS, beginning 134,487,611 19,741,982 CASH AND CASH EQUIVALENTS, ending $97,659,037 $47,912,447 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for Interest expense $19,468 $111,509 Cash paid for income taxes $73,256 $203,016
SOURCE RINO International Corp.