omniture

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

2010-11-16 02:05 1956

 

YTD Revenue Up 168% to $29.2M; FD EPS $0.65

Conference Call November 16, 2010 at 9:00 AM EST

BEIJING, Nov. 16, 2010 /PRNewswire-Asia/ -- 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.

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.

Investor Contact:


Hawk Associates


Frank Hawkins


305-451-1888


tritech@hawkassociates.com






TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





September 30

2010

(Unaudited)



December 31,

2009



ASSETS










Current Assets










Cash


$

29,064,765



$

7,171,464



Restricted cash



166,228




1,501,128



Accounts receivable, net of allowance for doubtful accounts of $475,397 and $56,491 as of September 30, 2010 and December 31, 2009, respectively



13,035,678




4,338,239



Unbilled revenue



6,493,306




3,952,763



Other receivables



1,865,990




273,602



Inventories



4,793,639




1,573,324



Deposits on projects



1,349,567




585,153



Prepayments to suppliers and subcontractors



3,854,546




1,898,900



Total current assets  



60,623,719




21,294,573



Long-term unbilled revenue



10,542,372




1,723,852



Plant and equipment, net



786,532




374,009



Intangible assets, net



3,520,141




797,854



Long-term deposit on projects



14,806






Long-term restricted cash



19,922






Goodwill



397,634






Total Assets


$

75,905,126



$

24,190,288



LIABILITIES AND EQUITY










Current liabilities










Accounts payable and cost accrual on projects


$

12,137,093



$

3,367,056



Customer deposits



1,526,175




494,047



Billings in excess of revenue






8,650



Other payables



1,733,605




8,633



Accrued liabilities



65,948




103,190



Deferred income taxes






141,478



Income taxes payable



1,257,156




144,232



Current portion of long-term liabilities



25,932




-



Total current liabilities  



16,745,909




4,267,286



Long-term liabilities






58,171



            Total Liabilities



16,745,909




4,325,457



Equity










Tri-Tech Holding Inc. shareholders' equity










Common stock ($0.001 par value, 30,000,000 shares authorized; 8,051,833 and 5,255,000 shares issued as of September 30,2010 and December 31, 2009, respectively.)



8,052




5,255



Additional paid-in-capital



47,207,179




12,942,650



Statutory reserves



50,655




50,655



Retained earnings



10,816,243




6,333,343



Treasury stock



(193,750)






Accumulated other comprehensive income



1,046,556




377,097



Total Tri-Tech Holding Inc. shareholders' equity



58,934,935




19,709,000



Noncontrolling Interests



224,282




155,831



Total equity  



59,159,217




19,864,831



Total Liabilities and Equity


$

75,905,126



$

24,190,288

















TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME









2010


2009


2010


2009




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


Revenues:








System integration

$

25,331,077

$

7,523,762


$

16,235,860


$

4,145,404


Hardware products:


2,873,945


1,878,048



599,104



483,907


Software products revenues:


1,005,238


1,503,359



34,404



281,522


Total revenues


29,210,260


10,905,169



16,869,368



4,910,833


Cost of revenues: (exclusive of depreciation and amortization shown separately below)












System integration


17,508,023


4,907,767



11,918,763



2,552,799


Hardware products


2,404,245


1,586,613



448,163



437,290


Cost of software


39,641


42,064



15,186



-


Total cost of revenues


19,951,909


6,536,444



12,382,112



2,990,089


Operating expenses:












   Depreciation and amortization expenses


168,576


75,449



93,968



30,049


   Selling and Marketing expenses


790,594


333,565



288,308



120,918


   General and Administrative expenses


2,907,977


1,036,549



1,313,884



429,580


Total operating expenses


3,867,147


1,445,563



1,696,160



580,547


Income from operations


5,391,204


2,923,162



2,791,096



1,340,198


Other income (expenses):












Other expense


(45,165)


(4,694)



(24,409)



(3,542)


Interest income


48,771


25,126



29,075



24,291


Interest expense


(3,012)


(4,173)



(249)



(514)


Tax rebates


132,754


49,042



51,238



26,275


 Total other income, net


133,348


65,301



55,655



46,511


Income before provision for income taxes and noncontrolling interests income


5,524,552


2,988,463



2,846,751



1,386,709


Provision for income taxes


1,024,676


450,466



605,256



314,371


Net income before allocation to Non-controlling Interests


4,499,876


2,537,997



2,241,495



1,072,338


Less: Net income attributable to Non-controlling Interests


16,976


12,452



(2,203)



(1,273)


Net income attributable to Tri-Tech Holding Inc

$

4,482,900

$

2,525,545


$

2,243,698


$

1,073,611


Other comprehensive income












Foreign currency translation adjustment


720,934


67,115



652,949



50,372


Comprehensive income


5,220,810


2,605,112



2,894,444



1,122,710


Less: Comprehensive income attributable to non-controlling interests


68,451


13,158



44,417



(508)


Comprehensive income attributable to Tri-Tech Holding Inc.

$

5,152,359

$

2,591,954


$

2,850,027


$

1,123,218


Net income attributable to Tri-Tech Holding Inc. per share:












Basic

$

0.66

$

0.69


$

0.29


$

0.27


Diluted

$

0.65

$

0.68


$

0.28


$

0.27


Weighted Average number of Common Shares outstanding:












Basic


6,789,604


3,679,542



7,817,085



3,924,565


Diluted


6,900,253


3,689,604



7,927,734



3,954,422



















TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS





For The Nine Months Ended September 30,





2010

(Unaudited)



2009

(Unaudited)



Cash flows from operating activities:






Net income before allocation to non-controlling interests


$

4,499,876



$

2,537,997



Adjustments to reconcile net income before non-controlling interests to net cash (used in) provided by operation activities:










Amortization of option expenses



277,490




-



Amortization of warrants



3,944




-



Depreciation and amortization



168,576




75,942



Provision for doubtful accounts



256,731




(11,047)



Deferred income taxes



(150,280)




251,765



Changes in operating assets and liabilities:










Restricted cash



1,438,072




-



Accounts receivable



(7,109,762)




(1,005,397)



Unbilled revenue



(11,084,619)




(2,780,854)



Other receivables



(1,617,344)




(494,253)



Inventories



782,743




(184,068)



Prepayments and deferred expenses



(1,848,967)




99,301



Accounts payable



7,836,160




1,190,555



Customer deposits



13,059




(80,481)



       Billings in excess of revenue



(8,677)




93,774



Other payables



(1,203,041)




(35,826)



       Accrued liabilities



(38,591)




(31,738)



Taxes payable



1,092,983




86,438



Net cash used in operating activities



(6,691,647)




(287,892)



Cash flows from investing activities:










Payment in investment in subsidiary



(1,447,000)




-



Cash acquired from business combination



175,490




-



Payment to purchase plant and equipment



(312,636)




(188,778)



Payment to purchase intangible asset



(293,824)




-



Payment of installment of purchasing vehicle



(32,824)




-



Loan to other parties



-




(586,944)



Net cash used in investing activities



(1,910,794)




(775,722)



Cash flows from financing activities:










Proceeds from the exercise of warrants into common stock



1,377,000




-



Proceeds from the Issuance of common stock



30,666,876




10,038,847



Payment of financing expenses to agencies



(392,784)




-



Payment in repurchase treasury stock



(193,750)




-



Repayment to a third party of an advance



-




(43,911)



Borrow money from third party



-




522,234



Net cash provided by financing activities



31,457,342




10,517,170



Effect of exchange rate fluctuation on cash and cash equivalents



(961,600)




120,102



Net increase in cash and cash equivalents



21,893,301




9,573,658



Cash and cash equivalents, beginning of period



7,171,464




732,418



Cash and cash equivalents, end of period


$

29,064,765



$

10,306,076



Supplemental disclosure of cash flow information:










Income taxes paid


$

80,019



$

17,496



Interest paid on debt


$

3,012



$

4,173



Supplemental disclosure of noncash investing and financing activities

Issued 260,000 common shares as one of the consideration to acquire

BSST


$

2,334,800



$

-




Source: Tri-Tech Holding Inc
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