* Revenues from NPCC Increased 50% Sequentially to $5.4 Million
TAIAN CITY, Shandong, China, Nov. 15 /Xinhua-PRNewswire-FirstCall/ --
Zeolite Exploration Company (OTC Bulletin Board: ZXPL), a leading nano
precipitated calcium carbonate (NPCC) and coal-based chemical products
manufacturer in the People’s Republic of China (“PRC”), today reported
financial results for the third quarter ended September 30, 2006. Pending
shareholder approval, Zeolite expects to amend its articles of incorporation
to formally change its corporate name to “ShengdaTech, Inc.’’ in the near
future.
Q3 Highlights
-- Record revenues of $18.8 million increased 30% sequentially
-- Strong sequential revenue growth of 50% from the NPCC segment
-- New NPCC factory in Xianyang City operating at 80% capacity
Revenues for the third quarter of 2006 increased to a record $18.8
million, up 30.0% sequentially from $14.5 million in the second quarter of
2006 and up 9.7% from the third quarter 2005 of $17.2 million. Operating
income for the quarter increased to $4.8 million, up 51.4% from the second
quarter of 2006 of $3.1 million and remained flat compared to the third
quarter 2005. Net income increased to $4.8 million or 52.1% from the
previous quarter of $3.2 million but was down slightly from $4.9 million in
the same period a year ago. Fully diluted earnings per share for the third
quarter 2006 was $0.09 compared to $0.06 in both the second quarter 2006 and
the third quarter 2005.
Commenting on the quarter, Xiangzhi Chen, President, CEO and Director of
Zeolite, “We are pleased to achieve record results for the quarter and to
see continued strong growth in both our NPCC and chemical segments. Our new
NPCC facility is fully operational and we are already in the process of
expanding capacity. Moreover, our new R&D center and key relationships with
top universities enables us to stay at the cutting edge of NPCC applications
which is a significant part of our growth strategy.”
Revenue growth during the quarter was driven by a 50.0% increase in NPCC
sales to $5.4 million from the previous quarter of $3.6 million and a 38.2%
increase from the third quarter 2005 of $3.9 million. Revenue from NPCC was
primarily comprised of sales for applications in tires and PVC material which
represented 60.0% and 31.2%, respectively, of total NPCC revenue. Demand of
NPCC for both tires and PVC continue to remain strong as revenue from each
increased 43.5% and 58.9%, respectively, from the second quarter of 2006.
Revenues from chemical products increased 23.5% to $13.5 million from
$10.9 million in the previous quarter and 1.3% from $13.3 million in the
third quarter 2005. Melamine represented the strongest growth in the
chemical segment increasing to $2.2 million or 41.9% from revenue of $1.6
million in the third quarter 2005. Methanol production capacity reached 100%
as revenues from methanol grew 24.6% from the previous quarter. The
percentage of revenue contribution from the NPCC segment increased to 28.5%
of revenue with 71.7% of revenue derived from chemical segments. This
compares with chemical and NPCC revenue breakdown of 75.3% and 24.7%,
respectively in the previous quarter and 77.4% and 22.6%, respectively for
the same period a year ago.
Gross profit for the third quarter of 2006 was $5.6 million, an increase
of 33.4% from $4.1 million sequentially and up 5.1% from the third quarter
2005 of $5.3 million. Gross margin for the quarter was 29.7%, compared to
28.9% in the previous quarter and 30.9% for the same period in 2005. The
decrease in gross margin from a year ago is attributed to the impact of the
decrease in gross margin of ammonium bicarbonate due to industry price
compression within the chemical segment. The gross margin for the chemical
segment was 26.6% for the quarter compared to 26.0% in the second quarter
2006 and 29.7% in the third quarter 2005. The gross margin for the NPCC
segment was at 37.3% in the third quarter compared to gross margin in the
previous quarter of 37.8% and the third quarter 2005 of 35.2%. Year over
year gross margin from the NPCC segment benefited from increased production
efficiencies.
Selling expenses for the quarter were $309,412, or 1.6% of revenue,
compared to $385,941 or 2.7% of revenues, in the previous quarter and
$231,279, or 1.3% of revenues, in third quarter 2005. The decrease in
selling expenses is due to a fiscal adjustment for rebates given to customers.
General and administrative (G&A) expenses were $502,615 or 2.7% of
revenues, as compared to $648,416, or 4.5% of revenues, in the second quarter
2006 and $241,706, or 1.4% of revenues, from the same period a year ago. G&A
expenses include a one time fee of $263,707 for the termination of a license
agreement with Singapore Nano Materials Pte. Ltd. in the second quarter 2006.
Operating income for the third quarter increased 51.4% to $4.8 million
from second quarter 2006 operating income of $3.1 million and down 1.4% from
$4.8 million for the third quarter of 2005.
Net income for the quarter increased 52.1% to $4.8 million from $3.2
million for the second quarter 2006 and down 1.1% from $4.9 million in the
same period a year ago. Fully diluted earnings per share for the third
quarter 2006 was $0.09 compared to $0.06 in both the second quarter 2006 and
the third quarter 2005.
Nine Months Results
Revenues for the first nine months of 2006 increased 14.2% to $49.4
million, compared to $43.3 million in the same period last year. Gross
profit was $13.7 million, up 4.1% from $13.2 million in the first nine months
of 2005. Operating income was $11.2 million, down 5.5% from $11.8 million
from the same period a year earlier. Net income decreased 4.4% to $11.4
million compared to $11.9 million in the first nine months of 2005. Fully
diluted earnings per share for the period was $0.23 compared to $0.14 for the
first nine months of 2005.
Financial Condition
As of September 30, 2006, Zeolite had $23.3 million in cash and cash
equivalents, $26.4 million in working capital and no long-term debt. Net
cash provided by operating activities for the nine months ended September 30,
2006 was $11.3 million. Shareholders’ equity stood at $51.0 million, up
from $24.8 million at year end 2005.
Business Outlook
Zeolite is continuing to strengthen its leadership position in the NPCC
market as it is now the largest supplier of NPCC in the world. The new
factory opened in August at Xianyang City is currently at 80% of utilization
and is expected to be at 100% utilization by the end of the year. The
Company has already ordered the equipment for the expansion of 40,000 metric
tons of additional NPCC capacity which is expected to be completed by April
2007. An additional 60,000 metric tons of capacity is planned to be completed
by the third quarter 2007.
“We expect to see continued growth in our higher margin NPCC segment as
we expand our capacity in 2007 and enhance our marketing efforts both
domestically and internationally. To support our sales efforts, we have
created an aggressive sales team of 24 sales reps, all with master degrees in
the chemical field,” commented Mr. Chen. “We are also focusing a
significant amount of our efforts in R&D and plan to set up two
nanotechnology laboratories and a material inspection and testing center.
Our R&D efforts are a critical part of acquiring new customers as each
customer has its own proprietary formula for its products. As for our
chemical business we plan to expand our methanol capacity and are in the
process of conducting a feasibility assessment for diethyl ether.”
Capital expenditures for the fourth quarter are expected to be around
$6.4 million. Zeolite is maintaining its year-end guidance of $71.0 and
$73.0 million in revenues and net income in the range of $15.0 and $17.0
million.
Conference Call
Zeolite will host a conference call on Wednesday, November 15th at 9:00 am ET
to discuss results for the third quarter of 2006. Joining Xiangzhi Chen,
Zeolite Exploration’s Chief Executive Officer on the call will be Anhui Guo,
the Chief Financial Officer and Richard Dean, the Company’s U.S.
Representative. To participate in the conference call, please dial the
following number five to ten minutes prior to the scheduled conference call
time: (888) 419- 5570. International callers should dial (617) 896-9871. The
pass code for the call is 34117070. If you are unable to participate in the
call at this time, a replay will be available on Wednesday, November 15, 2006
at 11:00 AM ET through Wednesday, November 22, 2006 at 11:00 AM ET. To access
the replay, dial (888) 286-8010. International callers should dial (617)
801-6888. The conference passcode is 34117070. This conference call will be
broadcast live over the Internet and can be accessed by all interested
parties by clicking on
http://phx.corporate-ir.net/playerlink.zhtml?c=177763&s=wm&e=1414274 . Please
access the link at least fifteen minutes prior to the start of the call to
register, download, and install any necessary audio software. For those
unable to participate during the live broadcast, a 90-day replay will be
available shortly after the call by accessing the same link.
About the Company
The Company is engaged in the business of manufacturing, marketing and
selling a variety of nano precipitated calcium carbonate ("NPCC") products
and coal-based chemicals for use in various applications. The Company
converts limestone into NPCC using its proprietary technology. The unique
chemical and physical attributes make NPCC a valuable ingredient in tires,
paints, polyvinyl chloride ("PVC") building materials and other products. It
enhances the durability of many products by increased strength, heat
resistance, and dimension stabilization. The Company is also engaged in the
manufacture and sale of coal-based chemical products namely ammonium
bicarbonate, liquid ammonia, melamine and methanol. The Company markets and
sells its coal-based products mainly for chemical fertilizers and raw
materials in the production of organic and inorganic chemical products,
including formaldehyde and pesticides.
Safe Harbor Statement
Under the Private Securities Litigation Reform Act of 1995: Any
statements set forth above that are not historical facts are forward-looking
statements that involve risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements,
which may include, but are not limited to, such factors as unanticipated
changes in product demand especially in the tire industry, changes in
composition of tires, pricing and demand trends for the Company’s chemical
products, changes to government regulations, risk associated with operation
of the Company’s new manufacturing facility, risk associated with large
scale implementation of the New NPCC manufacturing process, the ability to
attract new customers, ability to increase its product’s applications,
ability of its customers to sell products, cost of raw material, downturns in
the Chinese economy, and other information detailed from time to time in the
Company’s filings and future filings with the United States Securities and
Exchange Commission. The Company undertakes no duty to update any forward-
looking statement to conform the statement to actual results or changes in
the company’s expectations.
-- Financial Tables Below --
ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2006 2005
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $23,293,098 $10,749,300
Trade accounts receivable,
less allowance for doubtful
account of $44 (unaudited)
and $0, respectively 5,023,890 3,929,082
Other non-trade receivables 4,079,775 4,014,861
Advances to suppliers 128,963 262,591
Inventory 2,844,865 1,478,510
Receivable from related
parties 1,581 943,308
Total Current Assets 35,372,172 21,377,652
Property and Equipment, net of
accumulated depreciation of 24,521,021 8,579,676
$3,263,948 (unaudited) and
$2,545,460, respectively
Construction in progress 91,859 --
TOTAL ASSETS $59,985,052 $29,957,328
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable $3,342,104 $1,618,492
Other payables and accrued
expenses 2,440,821 1,936,971
Income and other taxes
payable 651,163 1,282,059
Payable to related parties 2,519,038 347,218
Total Current Liabilities 8,953,126 5,184,740
Shareholders’ Equity
Common stock - $0.00001 par
value; 1000,000,000 shares
authorized,
54,095,103 shares
(unaudited) and 45,120,000
shares outstanding,
respectively 541 451
Additional paid-in capital 22,641,997 8,608,864
Retained earnings 27,340,778 15,962,471
Accumulated other
comprehensive income (loss) 1,048,610 200,802
Total Shareholders’ Equity 51,031,926 24,772,588
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY $59,985,052 $29,957,328
ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONOLIDATED STATEMENTS OF OPERATIONS
AND CONPREHEHSIVE INCOME
(unaudited)
For the Three Months For Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Sales of Products $18,818,207 $17,159,831 $49,418,129 $43,258,493
Cost of Products
Sold 13,237,343 11,850,618 35,717,463 30,100,498
Gross Profit 5,580,864 5,309,213 13,700,666 13,157,995
Operating Expenses:
Selling
expense 309,412 231,279 751,842 628,591
General and
administrative
expense 502,615 241,706 1,758,507 686,388
Total Operating
Expenses 812,027 472,985 2,510,349 1,314,979
Income from
Operations 4,768,837 4,836,228 11,190,317 11,843,016
Other Income
(Expense):
Interest
income 33,480 21,496 77,899 56,405
Other
income -- -- 126,585 --
Other
expense -- -- (16,494) --
Net Other Income
(Expense) 33,480 21,496 187,990 56,405
Income Before Income
Taxes 4,802,317 4,857,724 11,378,307 11,899,421
Provision
for Income
Taxes -- -- -- --
Net Income $4,802,317 $4,857,724 $11,378,307 $11,899,421
Comprehensive
income: foreign
currency
translation
adjustments 36,584 203,684 152,326 253,639
Comprehensive
income $4,838,901 $5,061,408 $11,530,633 $12,153,060
Basic and Diluted
Earnings Per Share $0.09 $0.06 $0.23 $0.14
Basic and
Diluted Weighted
Average Shares
Outstanding 54,095,103 87,305,912 51,103,402 87,305,912
ZEOLITE EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended September 30
2006 2005
Cash Flows from Operating
Activities:
Net income 11,378,306 11,899,421
Depreciation and
amortization 659,681 760,482
Changes in assets and
liabilities:
Account receivables (1,004,215) (293,383)
Other receivables 14,314 (4,349,627)
Advances to suppliers 137,064 (367,029)
Inventory (1,320,184) (1,009,879)
Other current assets -- (9,828)
Trade accounts payable 1,667,554 (1,136,694)
Other payables and
accrued expenses 459,644 228,883
Income and other taxes
payable (647,947) 2,831,156
Advances from customers -- (75,515)
Net Cash Provided By Operating
Activities 11,344,217 8,477,987
Cash Flows from Investing
Activities:
Purchase of property and
equipment (16,231,659) (2,716,747)
Construction in progress (90,696)
Net Cash (Used) Provided by
Investing Activities (16,231,659) (2,716,747)
Cash Flows from Financing
Activities
Proceeds from issuance
of common stock 13,969,714 --
Changes in accounts
payable - related
parties 3,085,771 (2,344,778)
Distribution to
shareholders -- (7,822,477)
Net Cash (Used in) Provided
by Financing Activities 17,055,485 (10,167,263)
Effect of Exchange Rate
Changes in Cash 375,755 253,107
Net Change in Cash 12,543,798 (4,152,916)
Cash and Cash
Equivalents at
Beginning of Period 10,749,300 10,409,891
Cash and Cash
Equivalents at End of
Period 23,293,098 6,256,975
Three Months Ended Three Months Ended
September 30, 2006 June 30 2006
Revenues Gross Margin Revenues Gross Margin
Chemical $13,458,162 26.60% $10,894,122 26.00%
NPCC $5,360,045 37.30% $3,579,157 37.80%
Total $18,818,207 $14,473,279
Three Months Ended
September 30, 2005
Revenues Gross Margin
Chemical $13,280,070 29.70%
NPCC $3,879,761 35.20%
Total $17,159,831
