China Industrial Waste Management Announces Full Year 2009 Results
DALIAN, China, April 14 /PRNewswire-Asia/ -- China Industrial Waste Management, Inc. (OTC Bulletin Board: CIWT) ("China Industrial Waste Management" or the "Company"), a leading environmental services and solutions provider in China, today announced its results for the twelve months ended December 31, 2009.
Full Year 2009 Highlights
-- Revenues were $10.6 million compared to $13.4 million last year
-- Gross profit was $6.4 million compared to $9.2 million last year
-- Gross margin was 60.4% compared to 69.0% last year
-- Operating income was $1.2 million compared to $5.6 million last year
-- Net income was $2.0 million or $0.12 per diluted share, compared to
$4.8 million, or $0.35 per diluted share, last year
-- Completed the acquisition of a 65% equity stake in Hunan Hanyang
Environmental Protection Science & Technology Co., Ltd. ("Hunan
Hanyang")
-- Increased its ownership stake in Dongtai Organic Waste Treatment Co.,
Ltd. ("Dongtai Organic") to 52% from 49%.
"Our full year 2009 sales were down from 2008 because most of our customers are in China's export sector, an area of the market that was negatively impacted by the global economic slowdown," said Mr. Jinqing Dong, Chief Executive Officer. "However, the global economy and the export sector in China continue to recover from the trough of the first quarter of 2009. Our business is growing as our customers ramp up their production and exports from the very low levels of early last year, driving an increase in demand for our waste management services. Throughout this difficult period we have remained profitable and operating cash flow positive, and we expect our business to continue on this recovery path in 2010."
Full Year 2009 Results
For the twelve months ended December 31, 2009, revenues were $10.6 million compared to $13.4 million last year. The decrease in revenue is mainly attributable to the shrinkage of customer production volumes and unfavorable market prices as a result of the economic downturn. A majority of the Company's clients are export-oriented companies that were heavily affected by the reduced demand from overseas markets especially in the first half of 2009. Due to a strong rebound in the second half of 2009, the Company ended the year treating a higher volume of waste in 2009 than in 2008, but solid waste disposal fees decreased from 2008 levels.
Revenues from service fees were $6.9 million, or 65.6% of revenues, compared to $8.2 million, or 61.1% of revenues, last year. Sales of cupric sulfate were $1.2 million, or 11.8% of revenues, compared to $1.8 million, or 13.5% of revenues, last year. The decrease in sales of cupric sulfate is attributable to the unfavorable market price caused by the global economic recession. The average selling price of cupric sulfate fell 32% in 2009 compared to 2008.
Sales of recycled commodities were $2.4 million, or 22.6% of revenues, compared to $3.4 million, or 25.5% of revenues, last year. Due to a scaling down in production by the Company's clients, both the volume and selling price of scrap material decreased sharply. For example, the volume of plastic, slag and waste oil decreased 62.9%, 39.3% and 35.2%, respectively, in comparison with 2008. Average selling prices for cooper powder, aluminum sheet, tin and iron scrap in 2009 decreased by 34%, 34%, 27% and 22%, respectively, in comparison with 2008.
Cost of revenue was $4.2 million, relatively unchanged from $4.2 million last year. Gross profit was $6.4 million compared to $9.2 million last year. Gross margin was 60.4% compared to 69.0% last year. The Company's gross profit margin decline is attributable to the decrease in recycled commodities. There are three material factors that impacted the drop in gross profit margin in recycled commodities for the year ended December 31, 2009. There were higher costs to acquire etchant, which is used as a raw material to produce cupric sulfate, compared with 2008. As a direct consequence of the economic downturn, the selling price of the Company's products and scrap materials decreased significantly. Due to clients reduced production, the volume of recycled commodities the Company generated also decreased. Although the quantity of each specific type of recycled commodity fluctuated, in the aggregate the volume of recycled commodities the Company generated dropped from 8,308 tons in 2008 to 6,029 tons in 2009, a 27.4% decrease.
Total operating expenses were $5.1 million compared to $3.6 million last year. There are four primary reasons for the significant increase in operating expenses: (i) for 2008, R&D expenses were allocated into manufacturing expense and selling expense, while for 2009 they were allocated into G&A expense; (ii) for 2009, the Company did not meet the goal set forth in a Performance Escrow Agreement, and, therefore, 222,222 shares of the Company's common stock placed in escrow by a major stockholder as part of a private placement will be disbursed to the investors and the fair value of these shares was recorded into the G&A expense; (iii) for 2009, there was an increase in Dalian Zhuorui Recycling Co., Ltd.'s G&A expenses due to the depreciation of newly constructed buildings; and (iv) the financial statements for 2009 include the combined revenues, expenses and cash flows of Dongtai Organic, whose G&A expenses increased in 2009 compared with 2008. Income from operations was $1.2 million, compared to $5.6 million last year.
Net income was $2.0 million, or $0.12 per diluted share, compared to $4.8 million, or $0.35 per diluted share, last year.
Financial Condition
As of December 31, 2009, the Company had cash and cash equivalents of $11.4 million and working capital of $1.7 million. For full year 2009, the Company generated $2.0 million from operating activities. At December 31, 2009, the Company had stockholders' equity of $34.5 million compared to $29.4 million on December 31, 2008. In 2009, the Company acquired long-term banks loans in the amount of RMB 110 million (approximately $16.1 million), which are being used to construct facilities for Dongtai Water Recycling Co. Ltd. and Dongtai Organic.
Recent Developments
In January 2010, the Company's subsidiary Hunan Hanyang received a government subsidy of approximately $3.1 million from the central government, representing the first installment of a total expected government subsidy of approximately $16.1 million as a reimbursement of the construction cost of the Hazardous Waste Treatment Center of Changsha City, Hunan Province.
In January 2010, in recognition of his contributions to the economy of Dalian City, a major seaport and industrial center in Northeast China, the prestigious "Top Ten People in Dalian's Economy" award was bestowed on Mr. Jinqing Dong, the Company's founder and Chief Executive Officer. This award has historically been bestowed on leaders in industry, academia and politics, and include those who play a key role in Dalian's success as a city that has grown into an important industrial center. The award was presented by the city's senior officers in Dalian's Radio and TV Broadcasting Hall.
On December 20, 2009, the Company's Dalian Sludge Treatment Facility was featured on the China Central Television (CCTV) English Channel as an example of how the clean coastal city of Dalian is helping fulfill the PRC government's pledge to reduce greenhouse gas emissions by treating sludge at our local Dalian Sludge Treatment Facility. Dongtai Organic's sludge-energy approach was also broadcast during the recent United Nations Climate Change Conference in Copenhagen, Denmark.
On December 16, 2009, Dalian Dongtai Industrial Waste Treatment, Co., Ltd. ("Dalian Dongtai") acquired an additional 3% equity interest in Dongtai Organic, thereby increasing its ownership of Dongtai Organic to 52%. As a result of this increase in ownership, the financial statements and financial information presented for 2009 also include the combined revenues, expenses and cash flows of Dongtai Organic.
In September 2009, the Company acquired a 65% equity interest in Hunan Hanyang for a purchase price of RMB 15 million (approximately $2.2 million), payable in cash. Hunan Hanyang has entered into a build-operate-transfer ("BOT") agreement with the Bureau of Environmental Protection of Hunan Province, pursuant to which Hunan Hanyang has the right to construct and operate the Hazardous Waste Treatment Center of Changsha City, Hunan Province (the "Center") for 25 years upon completion of construction. The Center is included in the Chinese government's National Construction Planning of Hazardous Waste and Medical Waste Disposal Facilities. The total investment in this project is expected to reach approximately $27 million, $3.1 million of which has been received in the form of a government subsidy, representing the first installment of a total expected government subsidy of $16.1 million.
On August 31, 2009, and September 1, 2009, in order to strengthen its influence in the sludge treatment field, Dalian Dongtai acted as a co- organizer of the "Sino-German Workshop in Response to Climate Change Application of Sludge Treatment Technologies and Potential CDM Projects" in Dalian, China. The Workshop was organized by the Ministry of Housing and Urban-Rural Development of the People's Republic of China and the German Federal Environmental Department of Nature Conservation and Nuclear Safety. At the workshop, experts from China and Germany introduced current practices for sludge treatment in both countries as well as further developments in the context of Clean Development Mechanisms.
In July 2009, the Company received a subsidy from the central government of the PRC in the amount of RMB 10 million (approximately $1.5 million) to support the construction of the Centralized Hazardous Waste Treatment Center of Dalian City that is located in Dalian Development Area.
Business Outlook for 2010
The Company has seen signals of a strong recovery from the recession since the third quarter of 2009, as the demand from existing customers and new customers increased significantly, and the Company expects this trend to continue in 2010 and thereafter.
In terms of specific projects that will contribute to the Company's growth, Dalian Dongtai commenced the construction of its expansion project in July 2008. The total investment for the project was estimated to be $16 million, 30% of which (approximately $4.8 million) is expected to be subsidized by the central government. To date, $1.5 million has been released to the Company, and the balance is expected to be disbursed consistent with construction progress. The project is approximately 50% complete, and upon completion, which is expected in the fourth quarter of 2010, Dalian Dongtai's industrial solid waste treatment capacity is anticipated to increase to 114,000 tons per annum, or twice its existing capacity.
In accordance with Dongtai Organic's franchise agreement with the local government, Dongtai Organic is entitled to process all of the sludge generated from sewage treatment plants in the urban area of Dalian City. The project generates revenues from two sources: (i) fees which are based on the volume of sludge processed and (ii) fees from the sale of biogas (Methane) to the Dalian Gas Company. In the first quarter of 2010, Dongtai Organic received its first payment of $120,000 from the sale of biogas (Methane) and its first payment of $185,000 for processing municipal sludge in Dalian City. The Company expects Dongtai Organic to be an increasingly important contributor to the Company's financial performance in 2010.
For full year 2010, the Company expects revenues of between $15.0 million and $18.0 million and net income of between $4.5 million and $4.8 million.
Mr. Dong added, "The growth drivers of our business in 2010 will be a continued increase in industrial waste processing volumes from our existing customer base as China's export sector continues on the path of recovery from last year's slowdown and from our Dalian Dongtai expansion project, which is scheduled to be completed in the fourth quarter of this year; a broadening of our client base to new customers as we grow our capabilities and further refine our high tech waste management offerings; and the ramp up of our Dongtai Organic sludge treatment facility. Overall, we are optimistic and expect to see a continued recovery and growth in our business in 2010 and thereafter."
Conference Call
The Company will host a conference call at 8:00 a.m. ET on Wednesday, April 14, 2010 to discuss the full year 2009 results. To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 331-5105. International callers should call +1 (631) 865-5293. The conference passcode is 68487261. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Wednesday, April 14, 2010 at 9:00 a.m. Eastern Time. To access the replay, call (800) 642-1687. International callers should call +1 (706) 645-9291. The conference passcode is 68487261.
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
2009 2008
Revenues
Service fees $6,928,840 $8,182,379
Sales of cupric sulfate 1,244,441 1,806,721
Sales of recycled commodities 2,388,189 3,410,784
Total revenues 10,561,470 13,399,884
Cost of revenues
Cost of service fees 1,880,763 1,547,677
Cost of cupric sulfate 765,011 740,881
Cost of recycled commodities 1,539,925 1,866,086
Total cost of revenues 4,185,699 4,154,644
Gross profit 6,375,771 9,245,240
Operating expenses
Selling expenses 501,080 806,438
General and administrative
expenses 4,630,665 2,793,120
Total operating expenses 5,131,745 3,599,558
Income from operations 1,244,026 5,645,682
Other income (expense)
Other income 272,121 774,786
Other expense (198,938) (448,468)
Investment income (expense) -- --
Gain on acquisition 614,397 --
Total other income (expense) 687,580 326,318
Net income before tax provision 1,931,606 5,972,000
Tax provision 49,976 (659,853)
Net income 1,981,582 5,312,147
Net income attributable to the
noncontrolling interest (22,072) (560,029)
Net income attributable to
the Company $1,959,510 $4,752,118
Foreign currency translation
adjustment 63,216 1,109,348
Comprehensive income attributable
to the Company 2,022,726 5,861,466
Comprehensive income attributable
to the noncontrolling interest 22,072 560,029
Comprehensive income $2,044,798 $6,421,495
Basic and diluted weighted average
shares outstanding
Basic 15,269,062 13,755,274
Diluted 16,255,330 13,755,274
Basic and diluted net earnings per share
Basic $0.13 $0.35
Diluted $0.12 $0.35
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2009 2008
ASSETS
Current assets
Cash and cash equivalents $11,419,129 $5,710,784
Notes receivable 335,780 --
Accounts receivable, net 2,021,421 2,414,257
Construction reimbursement
receivable 846,270 --
Other receivables 91,872 108,304
Inventories 2,085,029 2,375,938
Advances to suppliers 800,694 550,931
Deferred expense 14,650 17,589
Total current assets 17,614,845 11,177,803
Long-term equity investment 87,900 --
Property, plant and equipment,
net 32,319,145 15,500,461
Construction in progress 9,123,927 12,892,048
Land usage right, net of
accumulated amortization 1,994,394 1,817,427
BOT franchise right 4,102,023 --
Escrow account -- 750,000
Deposit -- 14,798
Certificate of deposit 293,002 73,287
Restricted cash 96,707 25,204
Other asset 1,074,531 348,545
Deferred tax asset 377,381 --
Related party receivable 234,401 --
TOTAL ASSETS $67,318,256 $42,599,573
LIABILITIES
Current liabilities
Accounts payable $418,435 $780,458
Short-term loan 6,739,038 3,371,198
Tax payable 200,957 215,240
Advance from customers 544,125 539,013
Deferred sales 958,930 972,143
Accrued expenses 301,531 361,111
Construction projects payable 3,932,297 4,823,973
Other payable 235,211 213,248
Long-term loan-current portion 2,245,125 --
Related party payable 380,902 278,490
Total current liabilities 15,956,551 11,554,874
Long-term loan 13,755,512 --
Asset retirement obligation 610,445 502,278
Government subsidy 2,464,079 1,174,831
TOTAL LIABILITIES 32,786,587 13,231,983
EQUITY
Stockholders' equity of the Company
Preferred stock: par value $.001;
5,000,000 shares authorized; none
issued and outstanding -- --
Common stock: par value $.001;
95,000,000 shares authorized;
15,274,035 and 15,262,035 shares
issued and outstanding as of
December 31, 2009 and 2008
respectively 15,274 15,262
Additional paid-in capital 7,162,867 5,644,750
Deferred stock-based compensation (884,139) --
Accumulated other
comprehensive income 2,326,292 2,263,076
Retained earnings 17,490,919 15,531,409
Total stockholders' equity
of the Company 26,111,213 23,454,497
Noncontrolling interest 8,420,456 5,913,093
TOTAL EQUITY 34,531,669 29,367,590
TOTAL LIABILITIES AND EQUITY $67,318,256 $42,599,573
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2009 2008
Cash flows from operating activities:
Net income attributable to the Company $1,959,510 $4,752,118
Adjustments to reconcile net income
to net cash provided by operating
activities:
Noncontrolling interest 22,072 560,029
Depreciation 1,041,869 650,720
Amortization 59,133 25,578
Bad debt allowance 18,929 1,635
Stock and options issued for services 68,939 133,100
Share-based payment 565,050 --
Accretion expenses 108,341 64,659
Government subsidy recognized
as income (175,051) (43,052)
Changes in operating assets and liabilities:
Notes receivable (335,544) --
Accounts receivable 372,429 (1,821,570)
Other receivables (16,722) (69,519)
Inventories 94,215 (1,043,522)
Advance to suppliers (249,483) (160,772)
Deferred expense 2,928 25,195
Deposit -- 66,127
Other asset (717,684) (348,545)
Deferred tax assets (377,116) --
Accounts payable (361,380) 378,396
Tax payable (14,280) 121,286
Advance from customers 5,377 539,013
Accrued expense and deferred income (72,077) 658,629
Other payable 22,057 --
Net cash provided by operating activities 2,021,512 4,489,505
Cash flows from investing activities
Consideration for acquisition (2,371,646) --
Investment in Xiangtan Dongtai (87,839) --
Investment in subsidiary -- (185,627)
Purchase of property and equipment (11,340,864) (5,288,486)
Construction in progress (3,406,899) (4,402,154)
Purchase of intangible assets (244,895) --
Repayment from related party -- 404,450
Due from related party (234,237) --
Certificate of deposit (219,597) (73,286)
Net cash used in investing activities (17,905,977) (9,545,103)
Cash flows from financing activities
Repayment of construction project
payable (806,937) --
Proceeds from short-term loans 6,734,302 3,371,198
Repayment of short-term loans (3,367,151) (1,369,000)
Proceeds from long-term loan 16,103,767 --
Repayment of long-term loans (114,373) --
Proceeds from related party loan 102,479 --
Cash released from escrow account 750,000 --
Subsidy received from government 1,392,514 407,278
Proceeds from issuance of common
stock, net of offering costs -- 3,545,057
Escrow account -- (750,000)
Net cash provided by financing
activities 20,794,601 5,204,533
Effect of exchange rate on cash 798,209 1,333,186
Net increase in cash and cash
equivalents 5,708,345 1,482,121
Cash and cash equivalents, beginning
of period 5,710,784 4,228,663
Cash and cash equivalents, end of
period $11,419,129 $5,710,784
Supplemental cash flow information:
Cash paid during the year for:
Interest $916,491 $304,684
Income taxes $403,871 $441,170
Non-cash investing and financing
activities:
Common stock issuance cost - warrant $-- $398,466
Common stock issuance cost - stock $-- $113,000
Share-based payment awarded by major
shareholder to investor related to
private placement $565,050 $--
Contributed anaerobic
fermentation equipment $292,796 $--
Transfer out of construction
in progress $7,361,262 $--
Transfer of construction in progress
to property, plant and equipment $7,361,262 $--
About China Industrial Waste Management, Inc.
China Industrial Waste Management, Inc. is engaged in the collection, treatment, disposal and recycling of industrial wastes principally in Dalian and surrounding areas in Liaoning Province, People's Republic of China through its 90%-owned subsidiary Dalian Dongtai Industrial Waste Treatment Co., Ltd. ("Dalian Dongtai") and other indirect subsidiaries. Dalian Dongtai treats, disposes of and/or recycles many types of industrial wastes, and recycled waste products used by customers as raw material to produce chemical and metallurgy products. In addition, Dalian Dongtai treats or disposes of industrial waste through incineration, burial or water treatment, and provides environmental protection services, technology consultation, pollution treatment services, waste management design processing services, waste disposal solutions, waste transportation services, onsite waste management services, and environmental pollution remediation services. For more information, please visit the Company's website (http://www.chinaciwt.com ).
Cautionary Statement Regarding Forward-Looking Information
This release may include "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain such words as "may," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or the negative or other variations thereof or comparable terminology. These forward-looking statements are based on current expectations and projections about future events. Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, our actual performance may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission: the timing and magnitude of technological advances; the prospects for future acquisitions; the effects of political, economic and social uncertainties regarding the governmental, economic and political circumstances in the People's Republic of China, the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel; our projected sales, profitability, and cash flows; our growth strategies; anticipated trends in our industries; our future financing plans; and our anticipated needs for working capital. Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
For more information, please contact:
Company Contact:
Ms. Guo Xin, CFO
Phone: +86-411-8581-1229
Email: [email protected]
Mr. Zhang Dazhi, Company Secretary
Phone: +86-411-8259-5339
Email: [email protected]
Web: http://www.chinaciwt.com
CCG Investor Relations:
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: [email protected]
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE China Industrial Waste Management, Inc.
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