DALIAN, China, Nov. 11 /Xinhua-PRNewswire-FirstCall/ --
-- Sales Increase 154.4% to $44.9 million, Net Income (excluding a
non-cash equity compensation charge) increases 267.7% to $15.7 million
with EPS of $0.63
-- Q3 gross margins were 45.8% and operating margins were 36.4%
(excluding non-cash compensation charge)
-- Sales for the First Nine Months of 2008 increased 113.6% to $98.5
million, Net Income (excluding a non-cash equity compensation charge)
increased 180% to $31.9 million with EPS of $1.27
-- Backlog increased to approximately $61.1 million with $29.4 million
expected to be recorded as sales during the fourth quarter
RINO International Corp. (OTC Bulletin Board: RINO), through its direct and indirect subsidiaries, including Innomind Group Limited and Dalian Innomind Environment Engineering Co., Ltd. ("Innomind"), its
controlled-affiliate Dalian RINO Environmental Engineering Science and Technology Co., Ltd. ("Dalian Rino"), and Dalian Rino Environment Project Design Co., Ltd., a wholly-owned subsidiary of Dalian Rino (collectively, the "Company" or "RINO"), designs, manufactures, installs and services proprietary and patented wastewater treatment, desulphurization equipment, and high temperature anti-oxidation systems for iron and steel manufacturers in the People's Republic of China ("PRC"), today announced its financial results for the third quarter of 2008 which ended September 30, 2008.
SUMMARY FINANCIALS
Third Quarter 2008 Results
Q3 2008 Q3 2007 CHANGE
Net Sales $44.9 million $17.6 million +154.4%
Gross Profit $20.6 million $7.3 million +180.6%
GAAP Net Income $9.9 million $4.3 million +131.0%
Net Income* $15.7 million $4.3 million +267.7%
GAAP EPS $0.39 $0.24 +62.5%
EPS (Fully Diluted) * $0.62 $0.24 +158.3%
* The asterisk denoted Net Income and EPS in the Q3 2008 column
above are non-GAAP calculations and do not include $5.8 million
in accrued non-cash, equity compensation charges related to the
founders 2008 "Make Good" provision.
Third Quarter of 2008 Results (Unaudited):
Net sales for the third quarter of 2008 increased 154.4% to $44.9 million compared to $17.6 million for the third quarter in 2007 and 29.7% sequentially. Revenue growth was driven predominantly by further demand for the Company's waste water treatment and flue gas desulphurization product lines. During the third quarter, the company recorded $37.7 million in desulphurization projects, an increase of 207.3% from $12.3 million in third quarter 2007, $4.4 million in wastewater treatment system sales, an increase of 86.9% over the $2.4 million recorded in third quarter 2007, $164,000 in anti-oxidation equipment and coatings compared to $156,000 recorded in the same period 2007, and $2.6 million in machining service revenues, a decline of 6.8% from the $2.8 million recorded in the same period 2007.
"We are extremely pleased to report another record quarter for net sales and net income. Our growth was principally driven by flue gas desulphurization project installations for clients such as Nanjing Iron & Steel, Tonghua Iron & Steel Group Co., Ltd. and Handan Iron & Steel Co. SEPA mandates to clean up China's air has proven to be a principal catalyst for adoption and since our desulphurization solution was first commercialized in late 2006, we have recorded approximately $108 million in sales for this product alone," stated Mr. Zou Dejun, President and CEO of RINO International.
Gross profit for the third quarter of 2008 was $20.6 million, compared to $7.3 million for the same period last year, yielding gross margins of 45.8% and 41.6% respectively. The 420 basis point improvement in gross margin reflects changes in product mix in addition to prudent management of key input materials, such as steel, utilized to build our products.
Operating expenses for the third quarter were $10.0 million compared to $2.2 million for the same period last year. The $7.8 million increase in operating expenses was largely led by a $5.8 million, non cash equity compensation charge related to the "make good" provision, which was not present in the 2007 third quarter results, a higher depreciation and amortization charge as the Company's asset base increased, and an increase in selling, general & administrative expense of approximately $1.2 million Dalian Innomind from $0.4 million for the three month period ended September 30, 2007 to $1.6 million for the same period in 2008 after Dalian Innomind was incorporated on July 9, 2007. Operating margins were 23.4% compared to 29.2% for the third quarter of 2007. Excluding this equity compensation charge, operating income would have been $16.4 million; representing a 218.0% increase from the year ago period and the operating margin for the second quarter of 2008 would have been 36.4%, a 720 basis improvement from the third quarter of 2007.
GAAP Net income for the third quarter of 2008 increased 131.0% to $9.9 million from $4.3 million in the same year ago period. Non GAAP Net income, excluding the $5.8 million charge in equity compensation expenses, was $15.7 million, which represented a 267.7% increase compared with same period in 2007. The company did not incur income taxes during the third quarter of 2008 due to Dalian Innomind's tax holiday, but did have a $0.75 million provision during the third quarter of 2007. Fully diluted earnings per share were $0.39 compared to $0.24 based on 25.2 million and 17.9 million diluted shares outstanding. The variance in shares relates to the capital raise and public merger which were effected in October of 2007. Excluding the non-cash charge for equity compensation, the Company would have reported third quarter 2008 fully diluted earnings of $0.62 per share.
"Third quarter gross margins were at the higher end of our previously disclosed target 40-45%. Excluding the non cash equity compensation charges, we delivered a significant increase in net income on both a comparable and sequential basis, despite incremental costs incurred to support a much higher revenue base," commented Dejun Zou, Rino International Corp.'s Chief Executive Officer. "As previously disclosed, the founders placed 3.91 million shares of common stock in escrow against a "net income make good" provision of $28 million, and EPS of $1.12 for 2008. The company estimated a non cash equity compensation charge of $17.5 million would be incurred during the 2008 year if the net income provision was surpassed, which year to date it has been. This also equates to an estimated $5.9 million charge during the fourth quarter. These expenses are non-cash, solely relate to our make good provisions, do not impact our diluted share count or capital structure and will not be present during 2009."
Nine Month Financial Results
During the nine month period which ended September 30, 2008, net sales increased to $98.5 million, up 113.6% from $46.1 million for the same period in 2007. Wastewater treatment sales nearly doubled to $12.6 million while flue gas desulphurization and ancillary equipment sales increase 263.4% to $75.2 million. Gross profit increased 95.2% to $43.6 million versus $22.3 million for the first nine month period of 2007. Gross margin was 44.2% for the nine months ended September 30, 2008 compared to 48.4% during the same period of 2007 with the majority of variance coming from the absence of revenue related to a higher margin licensing agreement which was in place during 2007. Operating income increased 32.4% to $21.6 million compared to $16.3 million in the nine month period of 2007. Excluding the $11.7 million equity compensation charge, operating income would have been $33.3 million, representing a 104.3% increase from the first nine months of 2007. The company did not have an income tax provision during the first nine months of 2008, but did incur a $4.4 million provision during the first nine month of 2007. GAAP net income for the nine months ended September 30, 2008 was $20.3 million or $0.81 per diluted share, up 77.1% from $11.4 million, or $0.64 per diluted share in the nine month period of 2007. Non GAAP net income, excluding the equity compensation charge, was $31.9 million, which equates to $1.27 per diluted share. 25.2 million and 17.9 million diluted shares were utilized for these calculations during the first nine months of 2008 and 2007, respectively.
Balance Sheet:
Cash and cash equivalents and restricted cash totalled $2.4 million on September 30, 2008 (including $1.0 million in restricted cash), compared to $8.4 million (of which $1 million was restricted cash) on December 31, 2007. The company had $60.7 million in working capital on September 30, 2008 and a current ratio of 3.6 to 1. The accounts receivable balance was $52.9 million on September 30, 2008, compared to $20.8 million on December 31, 2007 and annualized days sales outstanding for the third quarter of 2008 was 106 days. Net cash used by operations was $10.0 million, which was due to increase in accounts receivable and advances for inventory purchases, mainly consisting of steel and other raw materials utilized in building the Company's products for installation.
"RINO has continued to book a significant number of new contracts with both existing and new customers, many of which will be completed this year. Backlog on our wastewater and desulphurization system stood at $61.1 million and we expect $29.4 million to be recognized as sales during the fourth quarter," Mr. Zou concluded.
NEW BUSINESS DEVELOPMENTS
-- RINO received notification concerning availability of the publication
for two international patents covering equipment and application
methodology related to its anti-oxidation technology from the
International Bureau of World Intellectual Property Organization
(WIPO). In addition, the Company received a technology achievement
certificate for its proprietary anti-oxidation technology from an
appraisal committee consisting of industry engineers, scientists,
and member of the Chinese Academy of Science, the licensor of the
technology. To date, RINO has installed a total of 7 systems for
several steel customers and the results have proven the technology
is both successful in functionality and ready for broad based
commercialization.
-- RINO is in preliminary testing for a new product it plans to
commercialize during 2009. This Sludge treatment is a proprietary
technology which utilizes superheated steam as a dehydrating medium to
process and recycle biological and chemical sludge, in addition to oily
sludge. Treated sludge can be used as agricultural fertilizer, for
building materials and burned for cleaner energy.
-- On September 5, 2008, Bruce Richardson resigned from his positions as
the Chief Financial Officer and Secretary of the Company to pursue
other interests. The Company accepted Mr. Richardson's resignation and
while his duties in the interim have been assumed by Chairman Ms. Qiu
Jianping and several managers, the Company is currently evaluating
several prospective CFO candidates.
About RINO International Corporation
RINO is a leading provider of environmental protection equipment for the iron and steel industry in China. Specifically, RINO designs, manufactures, installs and services proprietary and patented wastewater treatment, flue gas desulphurization equipment, and high temperature anti-oxidation systems, which are all designed to reduce either industrial pollution and/or improve energy utilization. RINO's manufacturing facility maintains the ISO 9001 Quality Management System and ISO 14001 Environment Management System certifications, in addition to receiving numerous government and industry awards.
Cautionary Statement Regarding Forward-Looking Information
This upcoming conference call may contain forward-looking information about the Company. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and statements which may include discussions of strategy, and statements about industry trends future performance, operations and products of each of the entities referred to above. Actual performance results may vary significantly from expectations and projections as a result of various factors, including without limitation and the risks set forth "Risk Factors" contained in the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and the Registration Statement on Form S-1 as amended filed with the SEC.
-- Tables to Follow --
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY KNOWN AS JADE MOUNTAIN CORPORATION)
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
ASSETS
September 30, December 31,
2008 2007
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 1,366,511 $ 7,390,631
Restricted cash 1,024,951 1,000,000
Accounts receivable 50,549,827 19,222,133
Notes receivable 5,119,245 202,670
Costs and estimated earnings in excess
of billings on uncompleted contracts 118,150 2,818,122
Inventories 690,460 178,480
Advances for inventory purchase 23,998,295 12,092,202
Other current assets and prepaid expenses 1,215,893 1,174,464
Total current assets 84,083,332 44,078,702
PROPERTY, PLANT AND EQUIPMENT, NET 12,075,935 11,000,581
OTHER ASSETS
Accounts receivable (non-current) 2,342,263 1,618,203
Prepaid expenses (non-current) 76,808 95,706
Advances for equipment and construction
material purchase 7,300,869 3,751,343
Prepayment for land use right 457,042 428,301
Intangible assets, net 1,224,962 1,190,289
Total other assets 11,401,944 7,083,842
Total assets $ 107,561,211 $ 62,163,125
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,843,492 $ 2,534,858
Billings in excess of costs and
estimated earnings on uncompleted
contracts 112,503 --
Customer deposits 4,018,785 116,214
Liquidated damages payable 2,116,708 1,000,000
Other payables and accrued liabilities 1,924,419 686,031
Due to shareholder 674,883 106,963
Other taxes payable 25,845 581,444
Income tax payable 894,904 5,970,794
Value added tax payable 4,453,106 2,989,365
Short-term loan 7,315,000 --
Total current liabilities 23,379,645 13,985,669
REDEEMABLE COMMON STOCK ($0.0001 par
value, 5,464,357 shares issued with
conditions for redemption outside the
control of the company) 24,480,319 24,480,319
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY
Preferred Stock ($0.0001 par value,
50,000,000 shares authorized,
none issued and outstanding) -- --
Common Stock ($0.0001 par value,
10,000,000,000 shares authorized,
25,000,000 shares issued and
outstanding as of September 30, 2008
and December 31, 2007) 2,500 2,500
Additional paid-in capital 19,909,557 8,221,663
Retained earnings 27,762,359 11,376,163
Statutory reserves 5,988,170 2,109,539
Accumulated other comprehensive income 6,038,661 1,987,272
Total shareholders' equity 59,701,247 23,697,137
Total liabilities and shareholders'
equity $ 107,561,211 $ 62,163,125
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY KNOWN AS JADE MOUNTAIN CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
Three months ended Nine months ended
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 2008 2007
REVENUES:
Contracts $43,575,844 $14,789,076 $92,060,717 $29,065,605
Services 1,305,292 2,849,885 6,482,958 17,066,298
44,881,136 17,638,961 98,543,675 46,131,903
COST OF SALES
Cost of contracts 23,298,573 8,838,709 51,144,465 18,147,939
Cost of services 848,959 1,328,688 3,341,128 5,265,797
Depreciation 165,889 140,867 486,145 399,681
24,313,421 10,308,264 54,971,738 23,813,417
GROSS PROFIT 20,567,715 7,330,697 43,571,937 22,318,486
OPERATING EXPENSES
Selling, general and
administrative
expenses 4,211,794 2,186,565 10,065,666 5,339,323
Research and
development -- -- 267,817 681,136
Stock compensation
expense-shares placed
in escrow 5,832,960 -- 11,665,920 --
TOTAL OPERATING
EXPENSES 10,044,754 2,186,565 21,999,403 6,020,459
INCOME FROM OPERATIONS 10,522,961 5,144,132 21,572,534 16,298,027
OTHER INCOME (EXPENSE),
NET
Other income 15,431 87 90,187 5,240
Government grant 15,863 47,036 -- --
Interest income 76,285 628 132,853 3,055
Interest expense (149,095) (178,278) (374,503) (489,233)
Liquidated damage
expense (616,708) -- (1,116,708) --
Other expenses (7,623) (336) (39,536) (3,532)
TOTAL OTHER INCOME
(EXPENSES), NET (665,847) (130,863) (1,307,707) (484,470)
INCOME BEFORE PROVISION
FOR INCOME TAXES 9,857,114 5,013,269 20,264,827 15,813,557
PROVISION FOR INCOME
TAXES -- 746,581 -- 4,370,199
NET INCOME 9,857,114 4,266,688 20,264,827 11,443,358
OTHER COMPREHENSIVE INCOME:
Foreign currency
translation adjustment 335,796 482,329 4,051,389 785,323
COMPREHENSIVE INCOME $10,192,910 $4,749,017 $24,316,216 $12,228,681
WEIGHTED AVERAGE NUMBER
OF SHARES:
Basic 25,000,000 17,899,643 25,000,000 17,899,643
Diluted 25,153,941 17,899,643 25,152,127 17,899,643
EARNINGS PER SHARE:
Basic $0.39 $0.24 $0.81 $0.64
Diluted $0.39 $0.24 $0.81 $0.64
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY KNOWN AS JADE MOUNTAIN CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(UNAUDITED)
Common Stock
Par Value $0.0001 Additional
Number Common Paid-in
of shares stock capital
BALANCE, December 31, 2007 25,000,000 $2,500 $8,221,663
Stock compensation expense-shares
placed in escrow 11,665,920
Imputed interest on advances
from a shareholder 21,974
Net income
Allocation to statutory reserve
Foreign currency translation gain
BALANCE, September 30, 2008
(Unaudited) 25,000,000 $2,500 $19,909,557
(Cont.)
Accumulated
Retained Earnings other
Statutory Unrestricted comprehensive
reserve earnings income Totals
BALANCE, December 31,
2007 $2,109,539 $11,376,163 $1,987,272 $23,697,137
Stock compensation
expense-shares
placed in escrow 11,665,920
Imputed interest on
advances from a
shareholder 21,974
Net income 20,264,827 20,264,827
Allocation to
statutory reserve 3,878,631 (3,878,631) --
Foreign currency
translation gain 4,051,389 4,051,389
BALANCE, September
30, 2008 (Unaudited) $5,988,170 $27,762,359 $6,038,661 $59,701,247
RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY KNOWN AS JADE MOUNTAIN CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $20,264,827 $11,443,358
Adjusted to reconcile net income to cash
used in operating activities:
Depreciation 603,965 483,778
Amortization 48,972 39,180
Imputed interest 21,974 31,090
Amortization of long term prepaid expense 25,090 16,330
Stock compensation expense - shares placed
in escrow 11,665,920 --
Accounts receivable (29,979,156) (7,820,427)
Costs and estimated earnings in excess of
billings on uncompleted contracts 2,413,818 (3,173,430)
Inventories (63,928) (33,498)
Other current assets and prepaid expenses 39,658 (492,896)
Advances for inventory purchase (10,826,678) (8,017,662)
Accounts payable (851,537) (74,090)
Billings in excess of costs and estimated
earnings on uncompleted contracts 110,250 189,046
Customer deposits 3,816,435 10,007
Liquidated damages payable 1,116,708 --
Other payables and accrued liabilities 1,169,036 344,385
Notes receivable (4,804,195) (2,123,148)
Other taxes payable (584,387) 357,910
Value added tax payable 1,229,207 1,581,692
Income tax payable (5,384,128) (503,559)
Deferred tax liabilities -- 4,370,199
(9,968,149) (3,371,735)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (902,594) (81,453)
Purchase of intangible assets -- (378,856)
(Increase) decrease in advances for
construction material and equipment
purchase (3,231,748) 560,785
Prepayment for land use right
-- (330,830)
Net cash used in investing activities (4,134,342) (230,354)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on due to shareholder (1,785,305) (3,076)
Proceeds from shareholder advances 2,334,594 --
Increase in restricted cash (24,951) --
Proceeds from short-term loan 7,168,500 --
Net cash provided by (used in) financing
activities 7,692,838 (3,076)
EFFECT OF EXCHANGE RATE ON CASH 385,533 78,036
DECREASE IN CASH AND CASH EQUIVALENTS (6,024,120) (3,527,129)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 7,390,631 3,604,350
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,366,511 77,221
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
$1,366,511 $77,221
Cash paid during the period for:
Interest $352,529 $428,465
Income taxes $5,384,128 $503,559
For more information, please contact:
For the Company:
Amy Qiu, Chairman of the Board
Tel: +86-411-8766-1233
Email: aqiu@rinogroup.com
Investors:
Matt Hayden
HC International, Inc.
Tel: +1-561-245-5155
Email: matt.hayden@hcinternational.net
