Tri-Tech Holding 2010 Revenue Up 159% to $43.5M; Net Income Up 83.8% to $7.1M. FD EPS $0.98; Q4'10 Revenue Up 143% to $14.3M; Net Income Doubled to $2.6M

Conference Call March 11, 2011 at 9:00 AM EST

Mar 10, 2011, 18:10 ET from Tri-Tech Holding Inc.

BEIJING, March 10, 2011 /PRNewswire-Asia-FirstCall/ -- Tri-Tech Holding Inc. (Nasdaq: TRIT), a premier Chinese company that provides leading turn-key solutions in China for water and wastewater treatment, water resource management, industrial safety and the pollution control markets, announced today that revenue for the fiscal year ended December 31, 2010 increased 159% to $43.5 million from $16.8 million in 2009. Net income rose 83.8% to $7.1 million from $3.9 million a year earlier. Fully diluted EPS for 2010 was $0.98 versus $0.92 for 2009.

(Logo: http://photos.prnewswire.com/prnh/20100603/CNTH016LOGO)

FY2010 Highlights

  • Revenue for FY 2010 increased 159% to $43.5 million from $16.8 million in FY 2009.
  • Revenue from the Water, Wastewater Treatment and Municipal Infrastructure segment increased 113% to $19.1 million.
  • Revenue from the Water Resource Management System and Engineering Service segment declined 30% to $5.5 million.
  • Revenue from the new segment, Industrial Pollution Control and Safety, was $19.0 million in FY 2010.
  • Gross profit (exclusive of depreciation and amortization) increased 123% to $14.8 million for FY 2010 from $6.6 million in FY 2009.
  • Gross margin for FY 2010 was 34% vs 39% for FY 2009.
  • Income from operations increased 113% to $8.7 million from $4.1 million in FY 2009.
  • Net income increased 83.8% to $7.1 million from $3.9 million in FY 2009.
  • Diluted earnings per share increased to $0.98 from $0.92 in 2009.
  • Weighted average number of diluted shares outstanding was 7,208,969 for FY2010 compared to 4,170,879 for FY 2009.
  • A follow-on public offering was completed on April 20, 2010 for the issuance of 2,366,833 ordinary shares at an offering price of $14.00 per share. This included the additional issuance of 224,083 ordinary shares from an over-allotment option exercised by the underwriters on May 5, 2010. The company netted $30.3 million from the offering.

Fourth Quarter 2010 Highlights

  • Revenue for Q4 2010 increased 143% to $14.3 million from $5.9 million in Q4 2009.
  • Gross profit (exclusive of depreciation and amortization) increased 144% to $5.5 million for Q4 2010 from $2.3 million in Q4 2009.
  • Q4 2010 gross margin was 38%, equal to that of Q4 2009
  • Income from operations increased 188% to $3.3 million from $1.1 million in Q4 2009.
  • Net income increased 96% to $2.6 million from $1.3 million in Q4 2009.
  • Diluted earnings per share increased to $0.32, from $0.24 in Q4 2009.
  • Weighted average number of diluted shares outstanding was 8.11 million as of the quarter ended December 31, 2010 compared with 5.54 million as of the quarter ended December 31, 2009.

Key FY 2010 Events

  • Awarded Build-Transfer (BT) projects for wastewater treatment plant upgrade and construction in January with contract values of $2 million and $1.68 million in Xinle, Hebei Province and Hangu, Tianjin Municipality, respectively.
  • Awarded 11 new contracts for flood control and river monitoring in February worth RMB8.7 million.
  • Awarded a BT contract in March for construction of a residential solid waste sanitary landfill for Xinle City worth $3.8 million.
  • Engaged Friedman LLP to assist the company in implementing Sarbanes-Oxley 404 in June.
  • Acquired 100% equity interest in BSST in August for consideration of $3.8 million.
  • Awarded a $6.0 million wastewater treatment facility upgrade and expansion contract in Xinjiang in August.
  • Relocated the corporate headquarters and the subsidiaries of Tranhold, Yanyu and BSST to new offices in September.
  • Won two bids for SINOPEC natural gas field projects in September.
  • Won the company's largest contract ever in October -- a $40 million joint bid for a major drinking water treatment plant with a daily capacity of 96,000 cubic meters for the city of Ordos in the Inner Mongolia Autonomous Region.
  • Entered into an international distribution, services and cooperation agreement with HTI, an Oregon-based company, in October.
  • Signed a letter of intent for a line of credit of $15 million with the Beijing Branch of Bank of Hangzhou in October.
  • Showcased and presented water/wastewater technologies at two major domestic forums in October and November.
  • Appointed eight senior executives in the second half of 2010, substantially strengthening the company's capabilities in technology, project operations and administrative management.

FY2010 Financial Performance Metrics

Total Revenue

Total revenue was $43.5 million in FY 2010, an increase of $26.7 million, or 159%, compared with $16.8 million in FY 2009. This increase was primarily attributable to the increase of 223% from $12 million in FY 2009 to $38.8 million in FY 2010 in system integration or EPC (engineering, procurement and construction) activities within the company's three operating segments. Revenue in the wastewater treatment segment was $19.1 million, an increase of $10.2 million, or 113%, compared to $9 million in FY 2009. Revenue from the water resource management segment saw a 30% decrease to $5.5 million from $7.8 million in FY 2009. This decrease was caused by delays in government budget allocations in some water conservancy projects. Revenue from the new segment, industrial pollution control and safety, was $19 million.

Total Cost of Revenue

Total cost of revenue (exclusive of depreciation and amortization) increased by $18.6 million, or 183%, from $10.2 million in FY 2009 to $28.8 million in FY 2010. System integration services accounted for most of the increase. Due to longer Build-Transfer periods associated with system integration projects and also in consideration of various project risks, the company has take a more conservative approach in estimating a relatively higher cost of revenue for the new contracts.

Net Income

Net income attributable to shareholders was $7.1 million in FY 2010, an increase of $3.2 million, or 83.8%, compared to net income attributable to shareholders of $3.9 million in FY 2009.

Diluted earnings per share for FY 2010 were $0.98 based on the net income of $7.1 million. This compared with net income of $3.9 million or $0.92 diluted EPS for FY 2009.

Gross Profit (exclusive of depreciation and amortization)

Gross profit (exclusive of depreciation and amortization) increased 123% to $14.8 million for FY 2010 from $6.6 million for FY 2009. Cost as a percentage of total revenue (exclusive of depreciation and amortization) increased to 66%, compared with 61% for FY 2009.

Gross Margin

Gross margin (exclusive of depreciation and amortization) for FY 2010 was 34% compared to 39% for FY 2009. This decrease was due to the drop in sales in our higher margin revenue category, software product sales, which declined $0.8 million, or 35% year on year. In addition, a new surge of inflation caused by the Chinese government's massive stimulus plan led to increases in our direct costs, especially the cost of raw materials and equipment, disproportionately compared with the increase of revenue. These factors jointly contributed to the lower gross margin.

Operating Income

Operating income increased 113% to $8.7 million from $4.1 million in 2009. Operating margin was 20% for FY 2010 compared to 24% for FY 2009.

Liquidity and Capital Resources

As of December 31, 2010, cash and cash equivalents were $23.4 million, more than triple those of $7.2 million on December 31, 2009. As of December 31, 2010, working capital was $37.1 million.

Subsequent Events

The company signed a 50-year land use agreement with the Tianjin municipal government in the amount of $5.28 million for an area of 158,954 square meters to build a research and development center. The company expects to complete the construction in 2012.

93,700 options of the company under its 2009 Stock Incentive Plan have been exercised and as a result 93,700 ordinary shares have been issued as of March 10, 2011.

Acquisitions

The company is selectively targeting acquisitions that will add significant value and further enhance its growth. Using a disciplined and conservative approach, the company is studying several prospects and expects to close one or two deals in the near future. The company continues to pursue MBR membrane technology, forward osmosis membrane technology and the latest ecological engineering for wastewater treatment along with advanced solid-liquid separation technology.

Order Backlog and Pipelines

As of December 31, 2010, the company had a total backlog of $59.6 million to be collected in 2011, including $52.3 million in the Water, Wastewater Treatment and Municipal Infrastructure segment. The remaining $7.3 million is in the Water Resource Management ($1 million) and Industrial Pollution Control and Safety segment ($6.3 million).

The company is currently tracking potential projects with a total expected value of $89.7 million, about $58.1 million of which is in the Water, Wastewater Treatment and Municipal Infrastructure segment, $18.3 million in the Water Resource Management segment and $13.3 million in the Industrial Pollution Control and Safety segment.

2011 Outlook

In 2010, Tri-Tech exceeded the company's guidance for total revenue of $40.6 million and net income of $7.0 million. For the year of 2011, the company anticipates revenue will reach the range of $69 to $80 million. Net Income will likely be between $11.0 and $12.8 million. Assuming a number of total outstanding shares of 8,124,433, the company expects EPS will be within the range of $1.35 to $1.57. These are the company's targets, not predictions of actual performance. The foregoing statements regarding targets are forward-looking and actual results may differ materially.

Management Comment

CEO Warren Zhao said, "2010 was a highly successful year for Tri-Tech with numerous significant developments led by our excellent financial results. The year also was marked by a successful stock offering that netted $30.3 million, the establishment of a $15 million line of credit with a leading Chinese bank, the growth of a strong pipeline of future revenues, our first major contract financed by a foreign bank and our largest ever contract, a $40 million award for a 96,000 cubic meters per day drinking water project in Ordos, Inner Mongolia that will meet the standards set by the new Chinese national standards for drinking water.

"Equally important, we acquired BSST for $3.8 million in cash and stocks. Led by Mr. Gavin Cheng, who was also named co-president of Tri-Tech and head of operations in China, BSST subsequently generated $6.7 million in revenue and became our newly designated third operating segment, Industrial Pollution Control and Safety. We believe this segment will continue to produce strong results for our company based on the existing robust client base of BSST in the oil, gas and petrochemical industries.

Comments on Three Operating Segments And Other Matters

Water/Wastewater Treatment and Municipal Infrastructure

"We are actively expanding our geographical reach from our base of operations near Beijing to the rest of China, including Hubei, Hunan, Ningxia, Inner Mongolia, Xinjiang, Shaanxi, Sichuan and Heilongjiang Provinces and Autonomous Regions. We set up a branch office with six full-time employees in Wuhan, the capital of Hubei Province. In 2010, we set up sales or project offices in Chengdu, Sichuan Province, Ordos, Inner Mongolia and Urumqi, Xinjiang. Winning our first project funded by a foreign government financial institution indicates that we have reached a new level and that we are able to compete for and win bids for high-end projects. Due to the shortage of fresh water sources, the government requires all new power plants in the coastal areas to provide processed water to operate the plants as well as supplying water for adjacent commercial and residential users. As a result, we believe there are significant opportunities for us in the area of desalinization.

Industrial Pollution Control and Safety

"Operations for this segment began in the first quarter of 2010. With the acquisition of BSST in 2010, we greatly benefited from the valuable market access and the existing client base of BSST in the oil, gas and petrochemical industries. The BSST business combination brought us additional revenue of $6.7 million in the Industrial Pollution Control and Safety segment for 2010. The rapid revenue growth clearly underscores the success of the business combination with BSST and has created positive momentum and traction in the Industry Pollution Control and Safety segment. We plan to continue to explore possible mergers and acquisitions strategically both within China and overseas. Additional industrial pollution control projects were awarded in Taicang. The immediately addressable market in industrial wastewater treatment is estimated to be $18.9 billion over the next five years and we fully expect to benefit in this environment.

Water Resources Management and Engineering Services

"In early 2010, the southern provinces of China were devastated by severe drought. As a result the government is now expediting construction of the National Drought and Flood Control Command System. Although we won a number of bids for disaster alert systems and water conservancy facilities, in particular, we participated in 19 mountain torrent forecasting system construction pilot projects out of the 103 pilot counties, some local government budgets were postponed from 2010 to 2011. In 2011, 500 counties will install torrent forecasting systems and we expect to be awarded a good share of this business in the second half of the year.

Funding for Continuous Growth

"We ended 2010 with cash reserves of $24.9 million and receivables of $19.4 million. In addition, we have a $15 million line of credit from the Bank of Hangzhou and we are in active negotiations with other major Chinese banks for additional lines of credit. We believe we will have sufficient funds to continue our growth in 2011.

Management Team Enhancement

"We made significant enhancements to our management and operational teams during 2010. This included not only the addition of Gavin Cheng, who became our new co-president, but also a number of other senior executives and the election of five new members to our board of directors. We are extremely pleased with the high level of their expertise and competence. This certainly bodes well for our future.

Looking Ahead

"China's environmental protection spending will continue to increase for the foreseeable future. In the 12th Five-Year Plan, spending by Chinese national and local governments in support of the environment is expected to reach $470 billion with an annual compound growth rate of 15% to 20% for the next 15 to 20 years. The plan sets a goal for a 67% increase in wastewater treatment capacity. In addition, the central government has earmarked $615 billion in the next 10 years for water conservancy projects. It is in this environment that we expect our business to continue to grow.

"The complexity and scale of our projects have grown rapidly from a single piece of equipment to comprehensive systems, to general contracting for complete solutions. We now undertake projects to design and build entire treatment plants and complicated flood monitoring and forecasting systems for river basins. We expect we will continue to earn a substantial majority of our revenue from our water resource management, municipal water, wastewater treatment and related services.

"As we expand both geographically and functionally, we are strongly committed to providing the highest level of service and productivity to our clients. Our ongoing investment in the finest engineering and sales talent we can find is an essential element of our strategy. Tri-Tech now has 250 outstanding employees and that number is likely to continue to grow along with our business.

"We are pleased we have been able to achieve a strong growth rate with a strong positive outlook for 2011. A sharp focus on producing quality results for both our customers and our shareholders remains a top priority. We greatly appreciate the support we continue to receive from the investment community and our investors," Zhao said.

Conference Call and 10-K Filing

Tri-Tech CEO Warren Zhao, President Phil Fan, Co-President Gavin Cheng and CFO Peter Dong will host a conference call at 9:00 AM EDT, Friday, March 11, (10:00 PM Beijing/Hong Kong Time on March 11) to review the company's financial results and respond to questions and comments.

To participate, call U.S. toll free number (877) 941-2069 approximately 10 minutes before the scheduled call. International callers, please dial 1-480-629-9713. The conference ID number is 4379562. A live and archived webcast of the call will be available at http://viavid.net/dce.aspx?sid=000082A3. Both an MP3 file one hour after the call and a transcript 48 hours after the call will be available. These will be archived for 90 days at http://www.tri-tech.cn and http://www.hawkassociates.com.

We will file our annual report 10-K to the SEC shortly after the conference call.

-FINANCIAL TABLES -

TRI-TECH HOLDING INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

For the Years Ended December 31,

Quarters Ended December 31,

2010

2009

 

2010(Unaudited)

2009(Unaudited)

Revenues:

System  integration

38,821,190

12,023,686

 

13,490,113

4,499,924

Hardware products

3,202,318

2,511,962

328,373

633,914

Software products

1,511,209

2,264,247

 

505,971

760,887

Total revenues

43,534,717

16,799,895

14,324,457

5,894,725

Cost of revenues:

 

 

 

 

 

System integration

26,061,987

8,003,667

8,553,964

3,095,900

Hardware products

2,665,441

2,115,052

261,196

528,438

Cost of software

40,316

57,206

675

15,143

Total cost of revenues

28,767,744

10,175,925

 

8,815,835

3,639,481

Operating expenses:

Depreciation and amortization expenses

325,256

119,173

 

156,680

43,724

   Other operating expenses

5,787,709

2,448,721

2,089,138

1,078,606

Total operating expenses

6,112,965

2,567,894

 

2,245,818

1,122,330

Operating income (loss):

8,654,008

4,056,076

3,262,804

1,132,914

Other income (expenses):

 

 

 

 

 

          Interest income

66,091

26,855

17,320

1,729

          Interest expense

(3,024)

(5,683)

(12)

(1,510)

          Tax rebates

147,595

107,380

14,841

58,338

          Other expense

7,522

(7,591)

52,687

(2,899)

Total other income (expenses), net

218,184

120,961

84,836

55,658

Income before provision for income taxes and noncontrolling interests income

8,872,192

4,177,037

 

3,347,640

1,188,574

Provision for income taxes

1,424,858

308,085

400,182

(142,381)

Net income

7,447,334

3,868,952

 

2,947,458

1,330,955

Net income attributable to Non-controlling Interests

370,326

18,182

353,349

5,730

Net income attributable to Tri-Tech Holding Inc

7,077,008

3,850,770

 

2,594,109

1,325,225

Other comprehensive income

Foreign currency translation adjustment

1,354,504

15,899

 

633,570

(51,216)

Comprehensive income

8,801,838

3,884,851

3,581,028

1,279,739

Comprehensive income attributable to noncontrolling interests

362,128

18,312

 

293,677

5,155

Comprehensive income attributable to Tri-Tech Holding Inc.

8,439,709

3,866,539

3,287,351

1,274,584

Net income attributable to Tri-Tech Holding Inc. per share:

 

 

 

 

 

Basic

$              1.00

$              0.94

$                   0.32

$                   0.25

Diluted

$              0.98

$              0.92

 

$                   0.32

$                   0.24

Weighted Average number of Ordinary Shares outstanding:

        Basic

7,102,436

4,081,301

 

8,030,733

5,255,000

Diluted

7,208,969

4,170,879

8,111,788

5,544,343

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

2010

December 31,

2009

ASSETS

Current Assets

Cash

$

23,394,995

$

7,171,464

Restricted cash

1,505,617

1,501,128

Accounts receivable, net of allowance for doubtful accounts of $427,020 and $56,491 as of December 31, 2010 and 2009, respectively

18,041,079

4,338,239

Unbilled revenue

3,208,473

3,952,763

Other receivables

1,427,050

273,602

Inventories

5,886,619

1,573,324

Deposits on projects

591,505

585,153

Prepayments to suppliers and subcontractors

1,311,844

1,898,900

Total current assets  

55,367,182

21,294,573

Long-term unbilled revenue

15,936,739

1,723,852

Plant and equipment, net

1,045,150

374,009

Intangible assets, net

4,331,261

797,854

Long-term restricted cash

203,418

Long-term prepayment on land use right purchasing

5,284,854

Goodwill

594,099

Total Assets

$

82,762,703

$

24,190,288

LIABILITIES AND EQUITY

Current liabilities

Accounts payable and cost accrual on projects

$

11,920,063

$

3,367,056

Customer deposits

1,650,174

494,047

Billings in excess of revenue

8,650

Other payables

2,717,502

8,633

Accrued liabilities

294,809

103,190

Deferred income taxes

141,478

Income taxes payable

1,656,800

144,232

Current portion of long-term liabilities

14,994

Total current liabilities  

18,254,342

4,267,286

Long-term deferred income taxes

187,295

Long-term liabilities

58,171

          Total Liabilities

18,441,637

4,325,457

Equity

Tri-Tech Holding Inc. shareholders' equity

Ordinary shares ($0.001 par value, 30,000,000 shares authorized; 8,051,833 and 5,255,000 shares issued as of December 31,2010 and 2009, respectively.)

8,052

5,255

Additional paid-in-capital

47,278,042

12,942,650

Statutory reserves

897,382

8

50,655

Retained earnings

12,563,624

6,333,343

Treasury shares

(193,750)

Accumulated other comprehensive income

1,739,799

377,097

Total Tri-Tech Holding Inc. shareholders' equity

62,293,149

19,709,000

Noncontrolling interests

2,027,917

155,831

Total equity  

64,321,066

19,864,831

Total Liabilities and Equity

$

82,762,703

$

24,190,288

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31,

2010

2009

Cash flows from operating activities:

Net income before allocation to non-controlling interests

$

7,447,334

$

3,868,952

Adjustments to reconcile net income before non-controlling interests to net cash used in operating activities:

Amortization of option stock-based compensation

371,003

-

Amortization of warrants stock-based payment

3,944

-

Depreciation and amortization

325,256

119,832

Provision for doubtful accounts

205,781

1,322

Deferred income taxes

(151,108)

66,061

Changes in operating assets and liabilities:

Restricted cash

(41,396)

(1,500,534)

Accounts receivable

(11,864,811)

(1,230,305)

Unbilled revenue

(13,004,198)

(4,243,749)

Other receivables

(349,691)

(424,813)

Inventories

(232,905)

(161,817)

Prepayments to suppliers and subcontractors

629,752

(1,315,244)

Accounts payable

5,087,655

1,761,867

Customer deposits

118,217

57,244

       Billings in excess of revenue

(8,725)

(22,009)

Other payables

(188,788)

218,941

       Accrued liabilities

163,659

18,443

Taxes payable

1,476,084

(140,036)

Net cash used in operating activities

(10,012,937)

(2,925,845)

Cash flows from investing activities:

Payment in acquisition of Beijing Satellite Science & Technology Co. Ltd

(1,447,000)

-

Cash acquired from business acquisition

177,292

-

Payment to purchase plant and equipment

(621,327)

(197,087)

Payment to purchase land use right

(5,170,248)

-

Payment to purchase intangible assets

(1,149,112)

-

Net cash used in investing activities

(8,210,395)

(197,087)

Cash flows from financing activities:

Proceeds from the exercise of warrants into ordinary shares

1,377,000

-

Proceeds from the issuance of ordinary shares (net of finance costs)

30,251,442

10,105,170

Capital injection by a minority shareholder

1,477,214

-

Payment in purchasing treasury shares

(193,750)

-

Repayment of loan for purchasing vehicle

(44,006)

-

Payment to a third party of an advance

-

(278,507)

Net cash provided by financing activities

32,867,900

9,826,663

Effect of exchange rate fluctuation on cash and cash equivalents

1,578,963

(264,685)

Net increase in cash and cash equivalents

16,223,531

6,439,046

Cash and cash equivalents, beginning of the year

7,171,464

732,418

Cash and cash equivalents, end of the year

$

23,394,995

$

7,171,464

Supplemental disclosure of cash flow information:

Income taxes paid

$

109,053

$

239,743

Interest paid on debt

$

3,024

$

4,538

Supplemental disclosure of noncash investing activity

Issued 260,000 ordinary shares as one of the consideration in purchasing Beijing Satellite Science & Technology Co. Ltd.

$

2,334,800

$

-

About Tri-Tech Holding Inc.

Tri-Tech designs customized sewage treatment and odor control systems for China's municipalities and its larger cities. These systems combine software, information management systems, resource planning and local and distant networking hardware that includes sensors, control systems, programmable logic controllers, supervisory control and data acquisition systems. The company also designs systems that track natural waterway levels for drought control, monitor groundwater quality and assist the government in managing its water resources. The company is also moving into the industrial pollution control market. Tri-Tech owns 23 software copyrights and two technological patents and employs 250 people. Please visit http://www.Tri-Tech.cn for more information.

An online investor kit including a company profile, press releases, current price quotes, stock charts and other valuable information for investors is available at http://www.hawkassociates.com/profile/trit.cfm . To subscribe to future releases via e-mail alert, visit http://www.hawkassociates.com/about/alert/ .

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. Among other things, expectations about expansion into adjacent industry verticals, growth of our Industrial Pollution Control Services, and the potential development of the company's other existing service lines contain forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Contact:

Hawk Associates

Frank Hawkins

305-451-1888

tritech@hawkassociates.com

SOURCE Tri-Tech Holding Inc.



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