China Industrial Waste Management Announces 2010 Second Quarter Financial Results
Second Quarter 2010 Revenues and EPS Increase 101% and 141%, Respectively
DALIAN, China, Aug. 12 /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 three and six months ended June 30, 2010.
Second Quarter Highlights
-- Revenues increased 100.8% to $4.9 million compared to the second
quarter of 2009
-- Gross profit increased 93.9% to $3.1 million
-- Operating income increased 242.6% to $1.8 million
-- Operating margin increased to 37.3% from 21.9%
-- Net income increased 178.3% to $1.2 million, or $0.07 per diluted share,
compared to $0.4 million, or $0.03 per diluted share for the same
period last year
-- Operating cash flow was $0.9 million versus negative cash flow from
operations of $1.0 million in the prior year period
-- New solid waste treatment facility ("Expansion Project"), which will
double existing capacity, is 70% complete and scheduled to open by the
fourth quarter of 2010
"China Industrial Waste Management had a strong second quarter as we again delivered robust growth with strong increases in revenue and earnings," said Mr. Jason Dong, Chief Executive Officer. "Sales continued to rise as our customers increased their manufacturing production in the wake of the global recovery. Our Dongtai Organic business remained a meaningful contributor to our revenues, and our sales and margins for recycled commodities grew in an environment where prices were significantly higher than last year. We are pleased with our performance and believe it is a testament to the high level of services we provide for our customers and our leadership position in the fast growing industrial waste management market in China."
Second Quarter 2010 Results
For the three months ended June 30, 2010, revenues were $4.9 million compared to $2.5 million in the same period last year, an increase of 100.8%.
Revenues from service fees, which consist of service fees generated from industrial solid waste treatment, sewage treatment and sludge treatment, were $3.2 million, or 65.5% of revenues, compared to $1.6 million, or 67.0% of revenues, in the same period last year. The 96.4% increase in revenues from service fees is mainly attributable to an increase in the Company's solid waste treatment business, as production volumes from the Company's industrial customers continue to recover from the lows of early 2009 and sales from Dongtai Organic, the Company's sludge treatment business, which began generating revenues in the first quarter of 2010. Dongtai Organic generated $1.0 million in revenues in the second quarter of 2010.
Sales of recycled commodities were $1.7 million, or 34.5% of revenues, compared to $0.8 million, or 33.0% of revenues, in the same period last year, representing an increase of 109.5%. As China's economy continues to recover from the global recession, prices for many raw materials have been increasing gradually, including for Dalian Dongtai's main products, cupric sulfate, iron, plastic and nonferrous metal. To capitalize on this situation, Dalian Dongtai has selectively sold some of its recycled commodities, including commodities that had been inventoried during 2009 due to the then prevailing low sales prices.
Gross profit was $3.1 million compared to $1.6 million in the same period last year, an increase of 93.9%. Gross margin was 62.0% compared to 64.2% last year. The 220 basis point decrease in gross profit margin is primarily attributable to the additional overhead imposed by sludge treatment operations, a recently-added business line which has not yet reached full capacity.
Income from operations was $1.8 million compared to $0.5 million in the prior year period, an increase of 242.6%. Operating margin increased to 37.3% from 21.9% in the prior year period. The increase in operating margin is primarily due to the Company's higher level of sales and operating leverage.
Net income increased 178.3% to $1.2 million from $0.4 million in the same period last year. Diluted earnings per share increased 141.5% to $0.07 from $0.03 in the same period last year.
First Half 2010 Results
For the six months ended June 30, 2010, revenues were $$9.0 million compared to $4.1 million in the same period last year, an increase of 121.9%. Revenues from service fees, which consist of service fees generated from industrial solid waste treatment, sewage treatment and sludge treatment, were $6.2 million, or 68.4% of revenues, compared to $2.8 million, or 69.9% of revenues, in the same period last year, an increase of 117.3%. Dongtai Organic generated $2.0 million in revenues in the first half of 2010. Sales of recycled commodities were $2.8 million, or 31.6% of revenues, compared to $1.2 million, or 30.1% of revenues, in the same period last year, representing an increase of 109.5%.
Gross profit was $5.7 million compared to $2.5 million in the same period last year, an increase of 133.1%. Gross margin was 63.5% compared to 60.5% last year. Income from operations was $3.4 million compared to $0.7 million in the prior year period, an increase of 373.0%. Operating margin increased to 37.7% from 17.7% in the prior year period.
Net income increased 188.6% to $1.8 million from $0.6 million in the same period last year. Diluted earnings per share increased 151.0% to $0.10 from $0.04 in the same period last year.
Financial Condition
As of June 30, 2010, the Company had accounts receivable of $4.9 million compared to $2.0 million as of December 31, 2009. The 140% increase is primarily due to Dongtai Organic, which had service fees due from the local government for sludge treatment services rendered and sales of methane gas and from Dalian Dongtai's increase in sales as its customers ramped up their production levels and produced more waste.
As of June 30, 2010, the Company had cash and cash equivalents of $4.8 million compared to $11.4 million as of December 31, 2009. The decrease is mainly due to the repayment of bank loans. As of June 30, 2010, the Company had a working capital surplus of $2.9 million compared to a surplus of $1.7 million as of December 31, 2009. During the first half of 2010, operating cash flow was $0.9 million versus negative cash flow from operations of $1.0 million in the prior year period.
Recent Developments
In August 2010, China Industrial Waste Management signed a major waste management contract with a national petrochemical firm located in Liaoning Province (the "Customer"). Under the terms of the contract, beginning on September 1, 2010, Dalian Dongtai will treat and dispose of the industrial waste sludge and slag generated by the Customer's production over the next 30-months, which the Customer estimates will total approximately 40,000 tons. Based on this expected volume, Dalian Dongtai anticipates it will generate an additional $3.65 million in revenues from this Customer over the life of the 30-month contract.
In July 2010, China Industrial Waste Management was approached to lead the oil waste management operation following China's largest recorded oil spill off the coast of Dalian City. The Company was asked to handle oil waste generated by the effort, including oil skimmed off the ocean surface and oil-saturated equipment and refuse such as used absorption felts.
In July 2010, the Company received a government subsidy of RMB 5 million (approximately $0.7 million) to complete its capacity expansion project for a centralized hazardous waste treatment facility (the "Expansion Project") in Dalian, Liaoning Province, China. This subsidy is the second installment of a series to be disbursed by the government as the Expansion Project progresses.
Business Outlook for 2010
Mr. Dong added, "As we enter the second half of 2010 we are proud of the progress our business has made and optimistic about the future of our company. Our core Dalian Dongtai solid waste treatment business has rebounded strongly from the lows of last year as our customers' production volumes continue to recover and we see this trend continuing at least through the end of 2010. To further bolster our capabilities in this market we are currently building one of the most advanced one-stop service centers for industrial solid waste treatment in China. The construction of this Expansion Project is now 70% complete and we expect it to become operational in the fourth quarter of this year. Once fully ramped up, this new facility will provide us with 114,000 tons per annum of industrial solid waste treatment capacity, which is double the capacity of our current plant.
"We are also excited about the prospects for our Dongtai Organic sludge treatment business. Dongtai Organic operates the first sludge treatment plant in China and uses anaerobic fermentation technology. This is a build-operate-transfer or 'BOT' project with a 20-year franchise period. During this period, this sludge-to-energy plant is expected to dispose of the sludge derived from all of the sewage treatment plants located in urban Dalian City. This plant has a designed capacity of 600 tons per day and is expected to generate approximately 11,000 cubic meters of methane gas once it reaches its full capacity, which is expected to happen within two years. The project has generated revenues for us since January 2010 from service fees paid by the local government and from the sale of methane to the Dalian Gas Company. As first movers in this space in China, we believe we are well positioned to operate other BOT projects across the country and our long-term goal is to see 30-40% of our revenues being provided by sludge treatment, a business that is characterized by stable revenues and strong cash flows and is in-line with the Chinese government's goal of encouraging sustainable and environmentally friendly development.
"Overall, as we look at our business going forward, we believe we have laid the groundwork for future growth. We have invested considerable resources in expanding our capacity and capabilities, and we are seeing the early rewards as we execute against our plan. Dongtai Organic's sludge processing facility and our soon-to-open Expansion Project are among the most advanced in China, and our other engineering projects demonstrate our considerable expertise and abilities. We believe our strong quarterly and first half results are evidence that we are on a compelling and profitable path in what we believe is a very attractive growth industry in China."
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time on Friday, August 13, 2010, to discuss its financial results for the second quarter of 2010.
To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (877) 331-5105. International callers should dial +1 (631) 865-5293. The Conference Pass Code is 92701295.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, August 13, 2010, at 10:00 a.m. Eastern Time. To access the replay, call (800) 642-1687. International callers should call +1 (706) 645-9291. The Conference Pass Code is 92701295.
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.
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2010 2009 2010 2009
Revenues
Service fees $3,226,923 $1,642,748 $6,171,481 $2,840,447
Sales of recycled
commodities 1,697,657 810,247 2,847,940 1,224,499
Total revenues 4,924,580 2,452,995 9,019,421 4,064,946
Cost of revenues
Cost of service fees 1,228,378 370,713 2,256,871 840,876
Cost of recycled
commodities 643,518 507,525 1,031,977 765,212
Total cost of revenues 1,871,896 878,238 3,288,847 1,606,088
Gross profit 3,052,684 1,574,758 5,730,574 2,458,858
Operating expenses
Selling expenses 168,680 44,756 320,304 222,071
General and
administrative expenses 1,044,763 993,214 2,012,857 1,518,585
Total operating expenses 1,213,443 1,037,970 2,333,160 1,740,656
Income from operations 1,839,242 536,787 3,397,414 718,202
Other income (expense)
Other income 80,425 47,393 87,592 62,069
Other expense (224,229) (94,416) (452,552) (79,741)
Settlement expense -- -- (439,821) --
Total other income
(expense) (143,804) (47,023) (804,781) (17,672)
Net income before tax
provision
Tax provision 254,941 60,250 387,942 105,279
Net income 1,440,497 429,515 2,204,691 595,251
Net income attributable
to the noncontrolling
interest 235,305 (3,618) 390,644 (33,401)
Net income attributable
to the Company $1,205,192 $433,132 $1,814,047 $628,652
Foreign currency
translation adjustment 183,453 8,299 184,985 (8,003)
Comprehensive income
attributable to the
Company 1,388,645 441,431 1,999,032 620,649
Comprehensive income
attributable to the
noncontrolling interest 235,305 (3,618) 390,644 (33,401)
Comprehensive income $1,623,951 $437,814 $2,389,677 $587,247
Basic and diluted weighted
average shares
outstanding
Basic 15,336,535 15,268,068 15,323,068 15,265,085
Diluted 17,594,787 15,268,068 17,549,633 15,265,085
Basic and diluted net
earnings per share
Basic $0.08 $0.03 $0.12 $0.04
Diluted $0.07 $0.03 $0.10 $0.04
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $4,830,344 $11,419,129
Notes receivable 135,663 335,780
Accounts receivable, net 4,850,576 2,021,421
Construction reimbursement
receivable 107,426 846,270
Other receivables 72,341 91,872
Inventories 2,530,549 2,085,029
Advances to suppliers 1,548,968 800,694
Deferred expense 17,214 14,650
Total current assets 14,093,080 17,614,845
Long-term equity investment 147,460 87,900
Property, plant and equipment, net 31,738,023 32,319,145
Construction in progress 12,472,166 9,123,927
Land usage right, net of accumulated
amortization 1,986,633 1,994,394
BOT franchise right 4,128,880 4,102,023
Certificate of deposit -- 293,002
Restricted cash 3,129,244 96,707
Other asset 950,461 1,074,531
Deferred tax asset 329,865 377,381
Related party receivable 235,936 234,401
TOTAL ASSETS $69,211,748 $67,318,256
LIABILITIES
Current liabilities
Accounts payable $1,203,296 $418,435
Short-term loan 2,949,200 6,739,038
Tax payable 229,224 200,957
Advance from customers 629,839 544,125
Deferred sales 355,682 958,930
Accrued expenses 29,705 301,531
Construction projects payable 2,934,195 3,932,297
Other payable 170,112 235,211
Long-term loan-current portion 2,259,825 2,245,125
Related party payable 383,396 380,902
Total current liabilities 11,144,474 15,956,551
Long-term loan 14,337,720 13,755,512
Asset retirement obligation 632,875 610,445
Government subsidy 5,562,442 2,464,079
TOTAL LIABILITIES 31,677,511 32,786,587
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;
15,336,535 and 15,274,035 shares
issued and outstanding as of June
30, 2010 and December 31, 2009,
respectively 15,337 15,274
Additional paid-in capital 7,602,625 7,162,867
Deferred stock-based compensation (768,817) (884,139)
Accumulated other comprehensive
income 2,511,278 2,326,292
Retained earnings 19,304,966 17,490,919
Total stockholders' equity of the
Company 28,665,389 26,111,213
Noncontrolling interest 8,868,848 8,420,456
TOTAL EQUITY 37,534,237 34,531,669
TOTAL LIABILITIES AND EQUITY $69,211,748 $67,318,256
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended June 30,
2010 2009
Cash flows from operating activities:
Net income attributable to the
Company $1,814,047 $628,652
Adjustments to reconcile net income
to net cash provided by operating
activities:
Nontrolling interest 390,644 (33,401)
Depreciation 1,033,799 590,263
Amortization 33,286 21,515
Amortization of deferred stock-based
compensation 115,322 --
Bad debt allowance 113,486 --
Stock and warrant issued for
settlement 439,821 --
Stock issued for service -- 15,600
Accretion expenses 18,314 18,055
Government subsidy recognized as
income (14,337) (46,940)
Changes in operating assets and
liabilities:
Notes receivable 201,011 (357,696)
Accounts receivable (2,911,253) (350,336)
Construction reimbursement
receivable 739,586 --
Other receivables 19,998 (94,860)
Inventories (429,084) (54,716)
Advance to suppliers (738,292) (211,287)
Deferred expense (2,452) 16,099
Other asset 124,812 (202,426)
Deferred tax assets 49,665 --
Accounts payable 777,080 (341,317)
Tax payable 26,777 (156,500)
Advance from customers 81,622 17,985
Accrued expense (272,036) (338,538)
Other payable (65,500) (84,509)
Deferred income (605,598) (7,513)
Net cash provided by (used in)
operating activities 940,718 (971,870)
Cash flows from investing activities
Investment in Xiangtan Dongtai (58,604) --
Purchase of property and equipment (246,186) (270,787)
Construction in progress (3,202,966) (5,707,268)
Purchase of intangible assets (6,873) --
Due from related party -- (234,171)
Certificate of deposit 293,019 (219,536)
Net cash used in investing activities (3,221,610) (6,431,762)
Cash flows from financing activities
Repayment of construction project
payable (1,017,247) (1,232,780)
Proceeds from short-term loan 2,930,188 6,732,430
Repayment of short-term loans (6,739,433) (3,366,215)
Proceeds from long-term loan 1,611,604 11,468,548
Repayment of long-term loans (1,122,628) --
Cash released from escrow account -- 750,000
Proceeds from related party loan -- 102,450
Net cash provided by (used in)
financing activities (4,337,516) 14,454,433
Effect of exchange rate on cash 29,623 1,750
Net increase (decrease) in cash and
cash equivalents (6,588,785) 7,802,552
Cash and cash equivalents, beginning
of period 11,419,129 5,710,784
Cash and cash equivalents, end of
period $4,830,344 $13,513,336
Supplemental cash flow information:
Cash paid during the year for:
Interest $660,077 $231,056
Income taxes $304,778 $269,275
For further information, please contact:
Company Contact:
Mr. Darcy Zhang, Director of Investor Relations
Tel: +86-411-8259-5339
Email: [email protected]
Web: http://www.chinaciwt.com
CCG Investor Relations:
Mr. Athan Dounis, Account Manager
Tel: +1-646-213-1916
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE China Industrial Waste Management, Inc.
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