-- Q3 Revenue Increased 37.5% to $3.2 Million
-- Revenue for the First Nine Months Increased 53.1% to $3.4 million, Net
Income Increased 63.7% to $3.6 Million with EPS of $0.27
-- Management to Host Earnings Conference Call at 4:30 p.m. on November
17, 2008
-- The Company Revises Fiscal 2008 Guidance
DALIAN, China, Nov. 17 /Xinhua-PRNewswire-FirstCall/ -- China Industrial Waste Management, Inc. (OTC Bulletin Board: CIWT), an industrial waste processor and provider of environmental protection, pollution treatment and waste management design services in the People's Republic of China ("PRC"), today announced its unaudited financial results for the third quarter of 2008 which ended September, 30, 2008.
Summary Financials:
Q3 2008 Q3 2007
Operating Revenue $3.2 million $2.3 million
Gross Profit $1.9 million $1.6 million
Net Income $0.83 million $0.81 million
EPS (Diluted) $0.06 $0.06
Third Quarter of 2008 Results (Unaudited):
Revenue for the third quarter of 2008 increased 37.5% to $3.2 million compared to $2.3 million for the same quarter in 2007. Revenue growth was driven by an increase in overall demand for the suite of services offered to the Company's installed customer base, an increase in the number of customers and volume for our waste processing services, and broader sales network for our recycled commodities.
"Our business, like many throughout China, was impacted by the Beijing Olympic games. Despite this short term interruption we continued to experience positive momentum in all aspects of our business," commented Mr. Jinqing Dong, Chairman and CEO of China Industrial Waste Management. "Our municipal waste water treatment facility came online and began contributing to revenues during the third quarter. In addition, we completed construction for the Zhuorui project, which utilizes patented plasma technology to recycle waste catalyst for the oil industry. We plan to commence operations in the near term as testing is finalized and expect this business line to favorably impact our margin profile in the future. Lastly, we made the decision to maintain an inventory of recycled commodities rather than sell them at currently deflated prices and expect this will positively impact future net income" Mr. Dong further elaborated.
Quarterly gross profit for the third quarter of 2008 was $1.9 million, compared to $1.6 million for the same period last year, yielding gross margins of 58.3% and 67.5% respectively. The company prudently managed operating expenses during the third quarter which were $0.67 million compared to $0.71 million for the same period last year. Operating margins were 37.3% compared to 36.9% for the third quarter of 2008 and 2007, respectively.
Net income for the third quarter of 2008 increased 2.4% to $0.83 million from $0.81 million in the same year ago period. Corresponding net profit margins were 26.1% for the quarter. The Company recorded a tax rate of 9% for the quarter and will utilize a similar tax rate for the balance of the year and 2009. Earnings per diluted share were $0.06 compared to $0.06 based on 13.9 million and 13.2 million diluted shares outstanding.
First Nine Months of 2008 ending September 30, 2008
Total Revenues increased by 53.1% to $5.4 million for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Gross profit increased 50.6% to $6.6 million for the period compared to the first nine months of 2007 and gross margins were 66.2% compared to 67.3% for each respective period with the slight decrease resulting from the sharp increase in the price for raw materials compared to the year ago period. Operating expenses for the first nine months of 2008 increased by 1% to $2 million compared to the year ago period and positively impacted operating margins which were 45.9% compared to 36.5%. Net income for the nine months ended September 30 2008 increased by $1.4 million, or 63.7%, to $ 3.6 million compared to the year ago period. Earnings per share were $0.27 compared to $0.16 based on 13.4 million and 13.2 million diluted shares for each respective period.
Balance Sheet and Cash Flow Statement:
Cash and cash equivalents and restricted cash totalled $5.3 million on September 30, 2008 compared to $3.3 million on December 31, 2007. The Company had $4.4 million in working capital on September 30, 2008. Inventory was approximately $1.9 million on September 30, 2008 compared to $1.3 million on December 31, the majority which consists of metals extracted during the recycling process. Due to a sharp decline in the market price management determined it would be more advantageous to hold inventory until prices improved. The accounts receivable balance was $2.4 million on September 30, 2008, compared to $0.59 million on December 31, 2007 and annualized days sales outstanding for the third quarter of 2008 was 67 days. Shareholders' Equity on September 30, 2008 was $22.0 million. Net cash provided by operating activities for the first nine months was $2.0 million.
"We continued to expand our customer base during the quarter as new global companies are relocating manufacturing facilities in Dalian. We are close to commencing operations for our municipal sludge treatment facility and continue to seek new BOT projects which provide long-term and recurring revenue stream. By leveraging our existing operating experience and technology in solid waste treatment business, we are penetrating new geographic markets in China. We believe our diversified business will continue the growth momentum due to the increasing government regulation and support to strengthen environmental services and protection in China" Mr. Dong concluded.
Recent Events:
-- During August and September and through three different closings,
China Industrial Waste issued a total of 66 units of unregistered
securities consisting of common stock and warrants at a purchase price
of $60,000 per unit for gross proceeds of $3,960,000.
-- Zhuorui Resource Recycling Co., Ltd, the Company's indirect majority-
owned subsidiary, provides plasma arc melting, separation and
purification of waste catalysts and treatment of industrial wastes.
Valuable metals are extracted from the waste catalyst and sold while
leftover slag is utilized to make cement. Due to obstacles encountered
during the testing stage, the commercialization of Zhuorui has been
temporarily delayed.
-- China Industrial Waste Management's municipal Build-Operate-Transfer
(BOT) waste water treatment facility commenced operations in third
quarter. Another BOT unit, Dongtai Organic Waste Treatment, is
expected to commence operations in the first quarter of 2009.
-- REVISION TO GUIDANCE - China Industrial Waste Management, Inc. now
anticipates its earnings for the year ending December 31, 2008 will be
$4.5 million versus previously published guidance of $7.8 million. The
revised guidance primarily results from a combination of (a) operating
delays encountered by Zhuorui Resource Recycling Co., Ltd., the
Company's indirect majority-owned, (b) temporary disruptions in the
operations of some of the Company's customers caused by the Olympic
Games recently held in the PRC and (c) the recent decline worldwide for
prices of recycled commodities, in light of which the Company has
determined to maintain an inventory of recycled commodities rather
than sell them at currently deflated prices.
Conference Call Information:
The conference call will take place at 4:30 p.m. ET on Monday, November 17, 2008. Interested participants should call 800-860-2442 when calling within the United States or 412-858-4600 when calling internationally. Utilize the pass code China Industrial for the call. This call is being web cast and can be accessed at the following link:
http://www.visualwebcaster.com/event.asp?id=53505.
About China Industrial Waste Management, Inc.
China Industrial Waste Management, Inc., International Ltd., 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. ("Dongtai") and other indirect subsidiaries. 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, 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.
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.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2008 2007
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $ 5,332,934 $ 3,260,307
Trade accounts receivable, net 2,366,837 594,322
Other receivables 237,100 22,453
Inventory 1,866,807 1,332,349
Advances to suppliers 269,533 390,159
Deferred expense 18,235 42,784
Total current assets 10,091,446 5,642,374
Investment 2,789,747 2,633,354
Property, plant and equipment 5,227,587 4,697,305
Less: accumulated depreciation (2,546,694) (2,055,268)
Net property, plant and equipment 2,680,893 2,642,037
Construction in progress 12,791,631 7,410,255
Land usage right, net of
accumulated amortization 1,703,778 1,732,074
Deposits 12,246 80,925
Related party receivable 978,534 388,796
Escrow account 750,000 --
Other asset 298,283 --
TOTAL ASSETS $ 32,096,558 $ 20,529,815
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,281,890 $ 279,600
Short-term loan 3,355,166 1,369,000
Tax payable 125,387 93,954
Deferred sales 619,681 667,389
Accrued expenses 22,694 7,236
Related party payable 294,078 536,362
Other payable 20,919 343,207
Total current liabilities 5,719,815 3,296,748
Asset retirement obligation liability 497,152 437,619
Other long-term liabilities 1,026,389 620,979
TOTAL LIABILITIES 7,243,356 4,355,346
Minority interest in subsidiary 2,806,773 2,259,595
Stockholders' equity
Preferred stock: par value
$.001; 5,000,000
shares authorized; none
issued and outstanding -- --
Common stock: par value
$.001; 95,000,000 shares
authorized;
14,534,175 and 13,220,843
shares issued and
outstanding at September 30,
2008 and December 31, 2007,
respectively 14,534 13,221
Additional paid-in capital 5,362,324 1,968,634
Stock subscription 220,000 --
Other comprehensive income 2,102,158 1,153,728
Retained earnings 14,347,413 10,779,291
TOTAL STOCKHODERS' EQUITY 22,046,429 13,914,874
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 32,096,558 $ 20,529,815
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Service fees $1,656,080 $1,227,503 $5,430,145 $2,855,733
Sales of cupric sulfate 423,891 334,728 1,804,481 1,382,499
Sales of recycled
commodities 1,115,150 762,352 2,671,634 2,233,586
Operating revenue 3,195,121 2,324,583 9,906,260 6,471,818
Cost of service fees 478,550 391,652 1,165,466 862,352
Cost of cupric sulfate 212,132 94,975 737,235 388,016
Cost of recycled
commodities 639,923 269,032 1,447,399 868,736
Costs of revenue
(including d epreciation) 1,330,605 755,659 3,350,100 2,119,104
Gross profit 1,864,516 1,568,924 6,556,160 4,352,714
Operating expense:
Selling expenses 233,783 306,492 648,886 788,516
General and administrative
expenses 439,021 404,766 1,356,797 1,201,773
Total operating expenses 672,804 711,258 2,005,683 1,990,289
Income from operations 1,191,712 857,666 4,550,477 2,362,425
Other income (expense):
Investment loss (5,494) -- (15,946) --
Interest income 11,441 11,770 17,627 23,659
Other income 1,934 13,568 8,388 15,054
Other expense (168,349) (3,069) (170,010) (3,122)
Total other income
(expense) (160,468) 22,269 (159,941) 35,591
Net income from continuing
operations before minority
interest and income tax 1,031,244 879,935 4,390,536 2,398,016
Income tax provision (103,499) -- (437,945) --
Income from continuing
operations 927,745 879,935 3,952,591 2,398,016
Discontinued operation, net -- (5,221) -- (5,221)
Minority interest 95,033 61,598 384,470 212,775
Net income $832,712 $813,116 $3,568,121 $2,180,020
Foreign currency
translation adjustment 202,900 163,314 948,408 387,455
Comprehensive income $1,035,612 $976,430 $4,516,529 $2,567,475
Basic weighted average
shares outstanding 13,902,510 13,220,843 13,392,040 13,220,843
Diluted weighted average
shares outstanding 13,902,510 13,220,843 13,392,040 13,220,843
Basic and diluted net
earnings per share $0.06 $0.06 $0.27 $0.16
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,
2008 2007
Cash flows from operating
activities:
Net income $ 3,568,121 $ 2,180,020
Adjustments to reconcile net
income to net cash provided by
operating activities:
Minority interest 547,178 212,775
Depreciation 491,426 330,581
Amortization 28,296 27,069
Bad debt allowance 7,782 --
Stock issued for services 117,100 12,000
Accretion expenses 59,533 21,016
Loss on disposal of subsidiary -- 5,221
Loss on equity investment (156,393) --
Value added tax credit (298,283) --
Changes in operating assets and
liabilities:
Accounts receivable (1,780,297) (229,964)
Inventory (534,458) (613,760)
Other receivables (214,646) (345,230)
Advance to suppliers 120,626 (9,205)
Prepaid expense -- (18,144)
Deposits 68,679 --
Accrued expense and deferred sales (7,701) 452,817
Accounts payable 680,002 264,065
Tax payable 31,433 (32,826)
Escrow account (750,000) --
Net cash provided by operating
activities 1,978,398 2,256,435
Cash flows from investing
activities
Investment in subsidiary -- (2,623,370)
Purchase of property and equipment (530,282) (187,172)
Construction contracts (5,381,376) (4,697,512)
Due from related party (589,738) (28,635)
Due to related party (242,284) (480,299)
Proceeds on sale of equity
investments -- 33,934
Net cash used in investing
activities (6,743,680) (7,983,054)
Cash flows from financing
activities
Proceeds from short term loans 3,433,235 --
Repayment of short term loans (1,447,069) --
Proceeds from issuance of common
stock 3,277,903 --
Stock subscription 220,000 --
Subsidy received from government 405,410 396,246
Net cash provided by financing
activities 5,889,479 396,246
Effect of exchange rate on cash 948,430 149,741
Net increase (decrease) in cash
and cash equivalents 2,072,627 (5,180,632)
Cash and cash equivalents,
beginning of period 3,260,307 6,478,978
Cash and cash equivalents, end of
period $ 5,332,934 $ 1,298,346
Supplemental cash flow
information:
Cash paid during the year for:
Interest $ 163,140 $ --
Income taxes $ -- $ --
Non-cash financing activities:
Common stock issuance cost $ 113,000 $ --
For more information, please contact:
Ms. Guo Xin, CFO
Tel: +86-411-8581-1229
Email: hellenguo@chinaciwt.com
Mr. Zhang Dazhi, Company Secretary
Tel: +86-411-8259-5339
Email: darcy.zhang@chinaciwt.com
Web: http://www.chinaciwt.com
Investors Contact:
Mr. Matthew Hayden, HC International
Tel: +1-561-245-5155
Email: matt.hayden@hcinternational.net
Web: http://www.hcinternational.net