Tri-Tech Holding Q3'10 Revenue Up 244% to $16.9M; Net Income Up 109% to $2.2M; FD EPS $0.28

BEIJING, Nov. 15, 2010 /PRNewswire-Asia-FirstCall/ -- Tri-Tech Holding Inc. (Nasdaq: TRIT), a premier Chinese company that provides leading turn-key solutions in China for water resources, water and wastewater treatment, industrial safety and the pollution control markets, announced today that revenue for the third fiscal quarter ended September 30, 2010 increased 244% to $16.9 million from $4.9 million in Q3' 2009. Net income for the quarter was $2.2 million, or a 109% improvement over net income of $1.1 million in Q3' 2009. Diluted EPS was $0.28 per diluted share compared with $0.27 diluted EPS in Q3' 2009.

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Additional Third Quarter 2010 Highlights

• Revenue from Water/Wastewater Treatment and Municipal Infrastructure operations increased 185.8% to $10.9 million
• Revenue from Water Resource Management Systems and Engineering Services increased 11.4% to $1.2 million
• Revenue from Industrial Pollution Control and Safety was $4.8 million compared with $1.8 million in the second quarter of 2010, a sequential gain of 375%
• Gross profit (exclusive of depreciation and amortization) increased 133.6% to $4.49 million from $1.9 million in Q3' 2009
• Gross margin decreased to 26.6% compared to 39.1% for Q3' 2009 reflecting a decline in the proportion of revenue attributable to higher margin software sales
• Income from operations increased 108% to $2.8 million from $1.3 million in Q3' 2009
• Weighted average number of diluted shares outstanding was 7.93 million, compared to 3.95 million as of September 30, 2009

Key Q3 Events

• The Company became the primary beneficiary of its VIE, Beijing Satellite Science & Technology Co. Ltd (BSST), on August 6, 2010, and at the same time the company paid consideration of $3.8 million for becoming the primary beneficiary.
• The Company won 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. This is the largest contract in the Company's history.
• Awarded a $6 million contract financed by an ODA loan for upgrading and expanding the wastewater treatment facility in Xinjiang
• Showcased water/wastewater technologies at China's International Eco-City Forum
• Added four new senior executives in operations, communications and engineering
• Won two bids for SINOPEC natural gas field projects

Subsequent Events

• On October 15, the Company signed an international distribution, services and cooperation agreement with HTI, an Oregon-based manufacturer of the world's only forward osmosis membranes, modules and systems.
• On October 28, the Company signed a letter of intent for a $15 million line of credit with the Beijing Branch of the Bank of Hangzhou.

Third Quarter 2010 Financial Performance

Revenue

Revenue was $16.9 million in the quarter ended September 30, 2010, an increase of $12.0 million, or 244%, compared to revenue of $4.9 million in the same period of 2009. This reflected increases in the number and size of new contractual engagements. For Water/Wastewater Treatment and Municipal Infrastructure, revenue was $10.9 million, an increase of $7.1 million or 185.8%, compared to $3.8 million in Q3' 2009. Revenue from Water Resources Management Systems and Engineering Services saw an 11.4% increase to $1.2 million from $1.1 million in Q3' 2009. Revenue from Industrial Pollution Control and Safety was $4.8 million, an increase of 165.7% from last quarter.

Net Income

Net income attributable to the shareholders of TRIT was $2.2 million, an increase of $1.17 million, or 109%, compared to net income attributable to the shareholders of TRIT of $1.1 million in the same period of 2009.

EPS

Diluted EPS was $0.28 based on net income of $2.24 million and diluted shares outstanding of 7.93 million as of September 30, 2010. This compares with net income of $1.1 million or $0.27 diluted EPS based on diluted shares outstanding of 3.95 million in Q3' 2009.

Gross profit

Gross profit (exclusive of depreciation and amortization) increased 133.6% to $4.5 million for the quarter from $1.9 million in Q3' 2009. This increase reflected an increased number of contracts.

Gross margin

Gross margin (exclusive of depreciation and amortization) for the quarter decreased to 26.6% compared to 39.1% for the same quarter in 2009. This was because the increased rate in cost of revenue (exclusive of depreciation and amortization) was greater than the rate of increase for revenue, which resulted from a decline in the proportion of revenue received from high-gross-margin software sales and an increase in the proportion of revenue received from low-gross-margin hardware sales and EPC.

Operating income

Operating income increased 108.3% to $2.8 million from $1.3 million in Q3' 2009. Operating margin was 16.5%, compared to 27.3% in Q3' 2009. Operating expenses for the quarter were $1.70 million, an increase of $1.12 million, or 192.2%, compared to operating expenses of $580,547 in the same period of 2009. The significant increase in operating expenses mainly reflected the rapid growth rate of general and administrative and selling expenses.

Liquidity and Capital Resources

As of September 30, 2010, cash and cash equivalents were $29.1 million, including a U.S. dollar deposit of $6.9 million and an equivalent RMB deposit of $22.3 million. As of September 30, 2010, working capital was $43.9 million.

Nine Months 2010 Financial Performance

Revenue for the nine months ended September 30, 2010 was $29.2 million, an increase of $18.3 million, or 168%, compared to revenue of $10.9 million in the same period of 2009. In the nine months ended September 30, 2010, net income attributable to the shareholders of TRIT was up 77.5% to $4.5 million, compared with $2.5 million for the first nine months of 2009. Diluted EPS was $0.65 compared to $0.68 for the same period of 2009.

Order Backlog

As of October 29, 2010, the Company had a total backlog of $54.9 million, most likely to be collected by the end of 2011. This included $50.5 million in Municipal Water and Wastewater Services, $0.4 million in Water Resources Services and $4.0 million in Industrial Sector Services.

Updated 2010 Outlook

For 2010, the Company now anticipates revenues will reach $40.6 million. Net income is expected to reach $7 million. 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

Chief Executive Officer Warren Zhao said, "Strong results from our Water/Wastewater Treatment and Municipal Infrastructure segment contributed to our strong financial performance in the quarter. We also realized excellent results from our Industrial Pollution Control and Safety business segment and continuing growth from our Water Resources, Management Systems and Engineering Services segment. This growth will likely enable us to meet our performance expectations for the year. We experienced a strong increase in our growing pipeline of projects and increasing opportunities for new business are very visible.

Comments on Three Operating Segments And Other Matters

Water/Wastewater Treatment and Municipal Infrastructure

"Our Water/Wastewater Treatment and Municipal Infrastructure business, our largest business segment, had a very strong quarter. We expanded the geographical footprint of our municipal wastewater business to Hubei, Inner Mongolia, Xinjiang, Shaanxi, Sichuan and Heilongjiang provinces. These expansion activities have already produced positive results. We've just won our largest project for the city of Ordos in Inner Mongolia autonomous Region – a 96,000 cubic meters per day drinking water treatment plant that will be one of the largest advanced water treatment plants of this kind in China.

"Winning this project has opened the doors for us to pursue new opportunities in the municipal drinking water treatment markets. The growth in this market is driven by the Chinese national standards for drinking water promulgated in 2006. These standards are designed to improve drinking water safety for nearly 1.4 billion people. In order for the entire country to fully comply with the new standards by a July 1, 2012 deadline, China must protect and improve the quality of source water through reclamation of wastewater and reduction of pollutants discharged or percolated to the natural water bodies and apply the most advanced technologies, such as membrane technology, disinfection and on-line monitoring technologies, to upgrade, retrofit or replace existing treatment facilities that use traditional technologies. We expect more business opportunities in this sector," Mr. Zhao said.

Industrial Pollution Control and Safety

"In the Industrial Pollution Control and Production Safety Segment, we realized significant growth in the quarter by completing several projects through our newly-acquired BSST division. We won several contracts from China Petroleum & Chemical Corporation (SINOPEC), such as a $1.15 million contract for an automated monitoring and communication system and a $1.0 million contract turnkey project of a 800M TETRA Network Communications System for use in natural gas operations in the Puguang gas field in Sichuan Province. In only a month as a Tri-Tech affiliate, BSST has already been awarded a large gas field safety production project. This further demonstrates Tri-Tech's expanding capabilities in the industrial pollution and safety control market and underscores our reasons for the strategic acquisition of BSST and our ability to build a long-term relationship with large petroleum and petrochemical companies.

"According to the World Bank Group, its private sector lending arm, the International Finance Corporation (IFC), is currently reviewing options for setting up a fund in China to help water companies invest in alternative projects. The new area is in reuse water: selling it to industry; to power plants and steel works and the petro-chemical industry. We see huge opportunities there. The IFC is understood to be considering a facility that would share risk with Chinese banks willing to lend money to water technology companies who are prepared to invest in improving water efficiency – including reuse schemes," Mr. Zhao said.

Water Resources Management and Engineering Services

"In our water resources management and engineering services segment, we continued to see significant possibilities in flood and torrent control and increased opportunities in the mountain torrent forecast sector.

"China's pilot mountain torrent forecasting program in 103 counties has been successful. Since the implementation of the program, 329 mountain torrents occurred in 61 of those 103 counties. With new forecasting and broadcasting systems implemented, 930,000 people were evacuated, avoiding an estimated 44,000 casualties. The government has earmarked significant funding to expand the program. Within the next three years, mountain torrent forecasting and broadcasting will be implemented in 1,836 counties in 29 provinces, municipalities and autonomous regions, which cover 4.63 million square kilometers, or 40% of the total land area of China.

"More than 500 million people will benefit from these systems. From September 2010 to June 2011, 500 counties will install and implement systems. Although we do not have the exact amount of total funding, based on our experience, an average of RMB 3 to 6 million for each county is a valid estimate, totaling RMB 150 to 300 million.

"Tri-Tech won contracts in 18 of the 103 pilot counties. All of those systems installed and implemented by Tri-Tech met the clients' requirements and expectations, and are generating positive results. Tri-Tech management has set a goal to maintain market share. We have put together a comprehensive business implementation plan including internal cash funding for the projects, arranging large domestic bank financing, adding personnel, setting up project offices in strategic locations, increasing production capacity of RTU and other equipment, setting up a procurement plan and solidifying strategic partnership with manufacturers. This is a valuable opportunity for our company and our shareholders," Mr. Zhao said.

Research and development

"As we stated in the second quarter, we have established cooperative relationships with several industrial companies in the United States and Europe. The technologies we are pursuing include MBR membrane and forward osmosis membrane technology. We signed a license agreement for new forward osmosis technology with Hydration Technology Innovations, LLC (HTI). Oregon-based HTI is the world's only commercial manufacturer of forward osmosis membranes, modules and systems. Tri-Tech will construct and operate one or more forward osmosis pilot units incorporating the technology. Tri-Tech is authorized and licensed to construct and operate such pilot units in both municipal and industrial sites for wastewater treatment testing, demonstration and evaluation," Mr. Zhao said.

Funding for Continuous Growth

"We are actively working with local Chinese banks to provide us with financial support. We have been granted a total line of credit for RMB100 million (approximately US$15 million) by the Bank of Hangzhou, Beijing Branch. We are also working with other major Chinese banks and expect to acquire more lines of credit to enable us to bid on more and larger projects. The line of credit provides us with the ability to expand and grow our business in a non-dilutive manner. It also strengthens our financial flexibility and optimizes our capital structure," Mr. Zhao said.

Management Team Enhancement

"In order to meet our rapid growth, we continue to engage the best talent in our industry. In the months of August and September we appointed four senior executives who have substantially strengthened our management team in operational management, engineering and corporate communications," Mr. Zhao said.

Internal Control Program Progress

"During the third quarter, we moved to a new Beijing office thereby further increasing our efficiency. We upgraded the hardware and software of our internal information system and we are in the process of upgrading our internal management system, including the introduction of instant messenger, our contact database, our file management system and our financial management system," Mr. Zhao said.

Conference Call

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 EST, Tuesday, November 16, (10:00 PM Beijing/Hong Kong Time on November 16) to review the Company's financial results and respond to questions and comments.

To participate, call U.S. Toll Free Number 1-877-941-8416 approximately 10 minutes before the call. International callers, please dial 1-480-629-9812. The conference ID number is 4379562. A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=00007CAF. 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 via http://www.tri-tech.cn and http://www.hawkassociates.com.

Financial Tables Follow

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 has also recently moved into the industrial pollution control market. Tri-Tech owns 15 software copyrights and two technological patents and employs 200 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.

SOURCE Tri-Tech Holding Inc.