2007 Net Sales Increases 491% to a Record $63.6 Million with Gross
Margins of 48.3%
Company Reports Net Income of $17.7 Million, Excluding a $7.5 Million
Non-Cash Equity Charge
Management to Host Earnings Conference Call Thursday, April 3 at 9 a.m. ET
DALIAN, China, April 2, 2008 /Xinhua-PRNewswire-FirstCall/ -- Jade Mountain Corporation (OTC Bulletin Board: JDMC), through its operating subsidiaries, including Dalian RINO Environmental Engineering Science and Technology Co., Ltd., a PRC company ("RINO"), today announced its results for the fourth quarter and year ended December 31, 2007.
SUMMARY FINANCIALS
Fourth Quarter 2007 Results
Q4 2007 Q4 2006 vs. Q4 2006
Net Sales $17.3 million $4.0 million +335%
Gross Profit $8.1 million $2.3 million +257%
GAAP Net Income ($1.4 million) $1.4 million N/A
Net Income* $6.1 million +333%
GAAP EPS ($0.06) $0.08 N/A
EPS (Fully Diluted) * $0.25 +213%
Fiscal Year 2007 Results
FY 2007 FY 2006 vs. FY 2006
Net Sales $63.6 million $10.8 million +491%
Gross Profit $30.7 million $5.4 million +467%
Net Income* $17.7 million $3.2 million +462%
GAAP Net Income $10.2 million $3.2 million +224%
EPS (Fully Diluted) * $0.71 $0.18 +294%
GAAP EPS $0.52 $0.18 +189%
* The denoted Net Income and EPS are non-GAAP calculations and do not
include $7.5 million non-cash, equity compensation expenses related to
the release of 1.674 million shares of stock from escrow to the founders
for the 2007 "Make Good" provision.
Fourth Quarter Financial Results
Net sales for the fourth quarter of 2007 increased 335% to $17.6 million compared to $4.0 million for the same quarter in 2006. The breakdown of revenues was as follows: Wastewater Treatment contracts represented 11% of revenue, Flue Gas Desulphurization systems and ancillary equipment was 52%, Anti-oxidation equipment and coating was 3%, engineering consulting services was 15%, and machining service contracts were 19%. New installations were completed at Jinan Iron & Steel, Panzhihua Iron & Steel, Shengfeng Iron & Steel, Handan Iron & Steel, Chongqing Iron & Steel and Kunming Iron & Steel. Quarterly gross profit for the fourth quarter of 2007 was $8.1 million, compared to $2.3 million for the same period last year, with fourth quarter gross margins of 47.0% and 57.3% respectively. Operating expenses included a $7.5 million non-cash equity compensation expense that the Company incurred as it was required to release 1.674 million "Make Good Shares" form escrow as the company surpassed its "After Tax Net Income Target" of $16 million.
GAAP net income for the 2007 fourth quarter including these non cash compensation charges was a loss of $1.4 million or a loss of $0.06 per diluted share, compared to net income of $1.4 million, or $0.08 per share during the fourth quarter of 2006. Shares utilized in the calculations were 24.7 million and 17.9 million shares respectively.
Excluding these non-cash charges, net income for the fourth quarter of 2007 would have been $6.1 million with earnings of $0.25 per diluted share.
"We continued to deliver measurable revenue and net income growth as evidenced by our ability to win new business and complete customer implementations in a timely manner," commented Mr. David Zou, President & CEO of Dalian RINO. "Our 2007 revenue more than quadrupled the prior year's. The pipeline of business opportunities remains strong as we continue to expand both our product portfolio and our customer base," added Mr. Zou. "Backed by an experienced management team, proprietary products, recognized brand and installed customer base, we are well positioned to capitalize on multiple avenues of growth in the environmental protection industry," Mr. Zou concluded, "Supported by stringent emission standards being established and enforced by The State Environmental Protection Administration (SEPA) as part of the current five year plan, we believe we are in the beginning stages of a long-term, secular growth opportunity for Cleantech solutions, and RINO is targeting the Iron and Steel Industry, which we currently estimate is more than a $2 billion addressable market specifically for our products."
Year End Financial Results
Net sales increased approximately 491% to $63.6 million for the year ended December 31, 2007, as compared to $10.3 million for 2006. During 2007, the Company signed and executed work and or signed contracts for eleven desulphurization projects, four wastewater treatment projects and two separate anti-oxidation projects. Following, is a break-down of revenues by product group:
For the twelve months ended December 31
% to % to
Net Sales Total Net Total Net
(in thousands) 2007 Sales 2006 Sales Increase
Wastewater
treatment
contracts $ 6,968 10.99% $ 5,499 53.34% 26.71%
Flue gas
desulphurization
(including
related
royalties, and
ancillary
equipment) 33,140 52.32% 1,673 16.23% 1,799.00%
Anti-oxidation
equipment and
coatings 1,968 3.10%
Machining service
contracts 11,859 18.70% 3,136 30.42% 278.16%
Technical support
services 9,452 14.90%
Total Net Sales $ 63,387 100% $ 10,308 100% 515.30%
Cost of sales increased by 516% to $32.9 million from $5.3 million for 2006 due to increased sales. Gross profit for 2007 was approximately $30.7 million, an increase of 508% or $25.4 million from $5.0 million for 2006 with gross margins of 48.3% and 50.3% in each respective period. The second quarter of 2007, included approximately $9.5 million dollars of revenue representing engineering consulting sales, a high value added business line which generated above average gross margins. Operating expenses for the twelve months ended December 31, 2007 increased to $14.9 million from $0.8 million for the same period ended December 31, 2007, which included a $7.5 million non-cash equity compensation expense that the Company incurred as it was required to release 1.674 million "Make Good Shares" form escrow as the company surpassed its After Tax Net Income Target of $16 million, in addition to increased SG&A expenses related to higher sale levels. Income from operations was $15.8 million, compared to $4.6 million for 2006, which represented operating margins of 24.9% and 43.0% respectively. Without the $7.5 million charge, operating margins for 2007 would have been 36.7%.
For 2007, GAAP net income was $10.2 million with earnings of $0.52 per diluted share, compared to 2006 net income of $3.2 million and earnings of $0.18 per diluted share. 19.7 million and 17.9 million shares were utilized in the calculation for 2007 and 2006 respectively. The company incurred $5.0 million in income tax expenses for 2007 compared to $1.2 million for 2006. Prior to the equity compensation charge, the effective tax rate would have been 28.2% in 2007 compared to 26.7% for 2006.
Net income, excluding the aforementioned $7.5 million equity compensation charge was $17.7 million with earnings of $0.90 per diluted share.
The company had 25 million shares outstanding on March 31, 2008.
Balance Sheet
Cash and cash equivalents totalled $7.4 million and restricted cash was $1 million as of December 31, 2007 compared to $3.6 million on December 31, 2006, representing an increase of 105%. The company had $35.5 million in working capital and a current ratio of 3.5 to 1. The increase was attributable to proceeds from the October, 2007 private placement stock issuance and increases in income taxes and value added taxes payable, partially offset by higher accounts receivable, higher contracts in progress, an increase in supplier deposits and repayment of bank loans. Accounts receivable rose to $21.0 million from $5.6 million, and was related to the significant increase in revenues and overall larger contracts with customers. Net cash used by operating activities was $7.0 million for the twelve months ended December 31, 2007 as compared to net cash of $3.5 million generated in the same period ended December 31, 2006. The deficit was chiefly attributable to an increase in inventories and receivables as the Company expanded equipment sales. On December 31, 2007 Shareholders' Equity was $48.2 million compared to $7.3 million on December 31, 2006.
Recent Company Highlights
-- In October 2007, completed a private placement with net proceeds of
approximately $21.3 million
-- In February, 2008 the company announced production on several
contracts totaling $20 million, including $7 million for its lamella
inclined comprehensive wastewater treatment systems and $13 million for
its desulphurization equipment. The Company is negotiating several more
purchase contracts across all of its product lines.
-- In February 2008, commercialized and received initial purchase orders
for a new Cleantech product which removes up to 99% of the dust from
sintering iron: The Electric and Cloth Bag Dust Catching System. Given
more stringent air quality regulations by SEPA, the Company believes
that demand for this product will continue to increase, which is
utilized as an adjunct to its main desulphurization systems.
-- In March 2008, appointed three new independent board members
increasing the total to five and creating a fully independent board.
Growth Strategy
-- Expand production capacity to address existing and growing market
demand. Continue to win new business and grow revenues for the
Company's existing and new products through increased distribution both
domestically and internationally.
-- Implement advanced information technology, financial reporting and
other management systems to improve revenue performance, asset
utilization, operating efficiency, and profitability.
-- Continue to implement strict cost control measures to maintain cost
competitiveness and improve return on assets
-- The Company spent approximately $0.8 million on R&D during 2007. It
plans to further its efforts to develop new applications for the iron
and steel industry.
2008 Make Good Provision
As part of the private placement dated October 5, 2007, management entered into a "make good agreement" and placed a total of 3.91 million shares into an escrow to secure its obligations to meet a net income target of $28 million in after tax net income ("ATNI") for 2008. If the objective is not met, the shares will be transferred on an all or none basis to the investors in the private placement on a pro-rata basis. A non-cash, equity compensation charge will be incurred in 2008 to account for this.
Conference Call
The conference call will take place at 9 a.m. ET on Thursday, April 3, 2008. Interested participants should call 800-762-9441 when calling within the United States or 480-629-9029 when calling internationally.
A playback will be available through April 10, 2008. To listen, please call 800-406-7325 within the United States or 303-590-3030 when calling internationally. Utilize the pass code 3861139 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00004E04 , or at ViaVid's website at http://www.viavid.net , where the webcast can be accessed through May 3, 2008.
About Dalian RINO Environmental Engineering Science and Technology Co., Ltd.
The Company, through its contractually controlled affiliate Dalian RINO Environmental Engineering Science and Technology Co., Ltd., a PRC company ("RINO"), is a 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 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 press release may contain forward-looking information about the Company, Innomind and RINO. 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 Current Report on Form 8-K filed on October 12, 2007.
NON-GAAP - Due to a non-cash, equity compensation expense derived from the founders "Make Good" Shares which were returned subsequent to surpassing the After Tax Net Income Target of $16 million the reported net income was not indicative of the operating results from the Company's business. As such, the calculations which address operating income, net income, or earnings per share which do not include this charge are Non-GAAP in nature and used solely to help investors have visibility into the operating metrics. These should not be solely relied upon when making informed decisions about the Company's financial statements. Please review the form 10K/A filed and review the subsequent notes to the financial statements which were filed with the SEC.
JADE MOUNTAIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
For the Year Ended December 31,
2007 2006 2005
NET SALES
Contracts $ 53,935,016 $ 8,635,094 $ 3,585,299
Services 9,452,292 1,672,536 --
Government grant 228,430 448,515 52,418
$ 63,615,738 $ 10,756,145 $ 3,637,717
COST OF SALES
Cost of contracts (30,984,925) (4,874,851) (2,626,882)
Cost of services (1,364,752) (190,213) --
Depreciation (571,267) (279,880) (146,944)
(32,920,944) (5,344,944) (2,773,826)
GROSS PROFIT $ 30,694,794 $ 5,411,201 $ 863,891
OPERATING EXPENSES
Selling, general and
administrative expenses 14,733,445 690,877 278,048
Depreciation 87,670 87,750 87,766
Amortization of intangible
assets 42,667 -- --
Amortization of land use
rights 11,654 11,122 10,821
Total Operating
Expenses 14,875,436 789,749 376,635
INCOME FROM OPERATIONS $ 15,819,358 $ 4,621,452 $ 487,256
OTHER INCOME (EXPENSES)
Other income 12,926 19,639 622
Interest income 32,065 855 8,315
Imputed interest (33,019) (26,482) (22,744)
Interest expenses (531,334) (297,303) (85,457)
Other expenses (56,417) (13,991) (31,603)
Total Other
Expenses (575,779)$ (317,282) $ (130,867)
INCOME FROM OPERATIONS BEFORE
TAXES $ 15,243,579 $ 4,304,170 $ 356,389
INCOME TAX EXPENSE (5,024,774) (1,151,300) (85,390)
NET INCOME $ 10,218,805 $ 3,152,870 $ 270,999
OTHER COMPREHENSIVE INCOME
Foreign currency translation
gain 1,789,994 174,303 22,975
COMPREHENSIVE INCOME $ 12,008,799 $ 3,327,173 $ 293,974
Net income per share-basic $ 0.52 $ 0.18 $ 0.02
Weighted average number of
shares -basic 19,611,510 17,899,643 17,899,643
Net income per share-diluted $ 0.52 $ 0.18 $ 0.02
Weighted average number of
shares -diluted 19,694,481 17,899,643 17,899,643
JADE MOUNTAIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2007 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,390,631 $ 3,604,350
Restricted cash 1,000,000 --
Accounts receivable, net of
allowances 21,043,006 5,622,219
Contracts in progress 2,818,122 --
Inventories, net 178,480 111,321
Deposits with suppliers 15,843,545 801,246
Other current assets and prepaid
expenses 1,174,464 171,772
Total Current Assets 49,448,248 10,310,908
PROPERTY AND EQUIPMENT, NET 11,000,581 10,460,727
OTHER ASSETS
Prepaid expenses (non-current) 95,706 --
Intangible assets, net 639,176 268,628
Land use rights, net 979,414 528,084
TOTAL ASSETS $ 62,163,125 21,568,347
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,534,858 $ 3,858,078
Liquidated damages payable 1,000,000 --
Other payables and accrued
liabilities 802,245 885,674
Notes payable -- 4,221,298
Due to a stockholder 106,963 451,921
Business tax and other taxes payable 581,444 195,438
Income tax payable 5,970,794 540,531
Value added tax payable 2,989,365 12,500
Total Current Liabilities 13,985,669 10,165,440
LONG-TERM LIABILITIES
Notes payable – long-term -- 3,453,790
Deferred tax liabilities -- 655,705
TOTAL LIABILITIES 13,985,669 14,274,935
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($0.0001 par value,
50,000,000 shares authorized,
none issued and outstanding as of
December 31, 2007 and 2006) -- --
Common stock ($0.0001 par value,
10,000,000,000 shares authorized,
2007: 25,000,000 shares issued and
outstanding, 2006: 17,899,643 shares
issued and outstanding) 2,500 1,790
Additional paid-in capital 32,701,982 3,827,447
Retained earnings
Unappropriated 11,376,163 2,940,341
Appropriated 2,109,539 326,556
Accumulated other comprehensive gain 1,987,272 197,278
Total Stockholders' Equity 48,177,456 7,293,412
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 62,163,125 $ 21,568,347
