omniture

RINO Announces Third Quarter 2010 Financial Results

2010-11-15 22:24 1040

DALIAN, China, Nov. 15, 2010 /PRNewswire-Asia-FirstCall/ -- RINO International Corporation (the “Company” or “RINO”) (Nasdaq: RINO), a leading provider of clean technology solutions to China’s iron and steel industry, announced today its unaudited financial results for the third quarter ended September 30, 2010.

Third Quarter Highlights

  • Total revenues in the third quarter of 2010 were $52.7 million, a 16.7% decrease from the corresponding period in 2009.
  • Operating profit in the third quarter of 2010 was $9.9 million, a 49.3% decrease from the corresponding period in 2009.
  • Net income in the third quarter of 2010 was $8.8 million, a 48.3% decrease from the corresponding period in 2009. Net income excluding change in fair value of warrants (non-GAAP) was $8.7 million, a 55.6% decrease from the corresponding period in 2009.
  • Diluted earnings per share (“EPS”) for the third quarter of 2010 was $0.31. Diluted EPS excluding change in fair value of warrants (non-GAAP) was $0.31, a 60.8% decrease from $0.78 for the corresponding period in 2009.

“Revenues in the third quarter were down due to recent reform in the steel industry which has caused a ‘wait and see’ approach toward capex including investment in clean technologies,” said Mr. Dejun Zou, director and chief executive officer of RINO. “We are also seeing our clients experiencing a tightening of cash flow which has led to an increase in accounts receivable. However we still have a full order book with several new contracts successfully negotiated as well as backlog from the third quarter which will generate revenues in the fourth quarter.”

“We believe that despite the temporary market downturn, the long-term industry environment remains very encouraging with increasing government pressure coming to bear on polluting industries and demand getting even stronger,” Mr. Zou continued. “We are racing to meet that demand by expanding capacity and investing in advanced technology to help us solidify our leading position. At the same time we are continuing to look for opportunities to expand outside our traditional de-sox and wastewater treatment segments to capture market share in new high growth areas.”

“After a weaker than expected third quarter we are revising our full year guidance to reflect the disruption caused by industry consolidation. However we remain confident in our long-run prospects and are moving ahead with several projects to drive revenues in the future. We are continuing to work to improve internal controls and we remain focused on fulfilling Sarbanes-Oxley requirements according to schedule,” Mr. Zou concluded.

2010 Third Quarter Results

RINO reported total revenues of $52.7 million for the third quarter of 2010, representing a 16.7% decrease from the corresponding period in 2009. Revenue decrease was caused by the decrease in our wastewater treatment and anti-oxidation businesses. Specifically, the Company recorded $43.0 million in revenues from the desulphurization business, an increase of 29.1 % from $33.3million in the same period of 2009; $7.5 million from wastewater treatment system sales, a decrease of 50.6% over the third quarter of 2009; and $1.7million in anti-oxidation equipment and coatings as compared to $13.8 million recorded in the same period of 2009.

Cost of sales for the third quarter of 2010 was $36.4 million as compared to $37.2 million in the same quarter of 2009, a decrease of 2.0%. Gross profit was $16.3 million in the third quarter of 2010 compared to $26.1 million for the same period of 2009, a decrease of 37.7%, and representing gross margins of 30.9% and 41.3%, respectively. The decreases in gross margins were mainly attributable to increases in the costs of outsourcing. Outsourcing costs for the third quarter of 2010 were $9.7 million, of which $5.7 million were incurred by the Shougang Jingtang Project using a cost recovery method, representing an increase of 164.8% from $3.7 million in the same period of 2009.

Total operating expenses for the third quarter of 2010 were $6.4 million as compared to $6.6 million for the same period in 2009. The decrease in operating expenses was primarily due to decrease in sales commission expenses. Operating margin was 18.8% for the third quarter of 2010 as compared to 30.9% for the third quarter of 2009. The decrease of operating margin was mainly due to the intensive competition in desulphurization market, which leads to our reduced gross margin. At the same time, revenue from the Shougang Jingtang Project is recognized using a cost recovery method and no gross margin was recognized during the three months ended September 30, 2010.

Stock compensation expenses, which were allocated to related operating costs and expenses line items, increased in aggregate to $325,937 in the third quarter of 2010 from ($9,263) in the corresponding period in 2009. The increase in share-based compensation expenses was primarily due to additional options granted to staff and board members.

Income tax expense provision was $1.5 million, or $0.05 per share, for the third quarter of 2010, compared to nil in the same period in 2009. The Company's effective tax rate for the third quarter of 2010 is 14.5% compared to 0% for the same period in 2009. As a foreign investment enterprise, and the only taxable entity within the Company in the third quarter of 2010, Dalian Innomind Environment Engineering Co., Ltd., is qualified for an income tax exemption for 2008 and 2009, and a 50% reduction from the normal income tax rate of 25% for the three years from 2010 through 2012.

Net income for the third quarter of 2010 was $8.8 million, representing a decrease of 48.3% as compared to $17.1 million reported in the same period in the prior year. Diluted earnings per share were $0.31 for the third quarter of 2010 as compared to $0.68 for the same period in 2009, based on 28.6 million and 25.2 million weighted average shares outstanding, respectively. Non-GAAP net income, which is net income excluding a $97,620 gain from the change in the fair value of warrants for the third quarter of 2010, was $8.7 million, translating to non-GAAP diluted EPS of $0.31.

Balance Sheet and Cash Flow Discussion

Cash and cash equivalents as of September 30, 2010 were $56.1 million, representing a decrease of 58.3% as compared to $134.5 million as of December 31, 2009. At the end of the third quarter, the Company had working capital of $245.0 million and a current ratio of 7.1.

Accounts receivable stood at $112.0 million, a 93.8% increase from $57.8 million reported as of December 31, 2009. Accounts receivable days sales outstanding stood at 138 days compared to 111 days at the end of last year. As of September 30, 2010, the Company had $8.2 million in long-term loans and $3.7 million in short term loans. Stockholder's equity increased 26.4% to $258.1 million as of September 30, 2010 as compared to $204.2 million as of December 31, 2009.

For the first nine months of 2010, cash used in operations totaled $67.6 million as compared to $8.4 million cash provided by operations for the first nine months of 2009, mainly due to an increase in accounts receivable, advances for inventory purchases to support additional projects, and costs and estimated earnings in excess of billings on uncompleted contracts.

Backlog as of September 30, 2010

Backlog, defined as unfinished projects, includes any projects that the Company has undertaken but hasn’t yet commenced. As of September 30, 2010, backlog amounted to $56.3 million (VAT excluded), the breakdown of which is set forth in the following table. The Company expects that approximately 75% of the backlog will turn into revenue by the end of 2010.


Product Segment

Amount ($ millions)

 

1.  Desulphurization Systems

36.9

 

2.  Wastewater Treatment

11.7

 

3.  Anti-oxidation Systems

7.7

 

Total

56.3

 
     


Outlook for Fiscal Year 2010

Affected by reform and contracting cash flows in the iron & steel industry in China, the company is expecting softer demand for its services in the immediate future. Based on analysis of current market demand, the company estimates its total revenue for fiscal year 2010 to range from $203.0 million to $211.0 million, down from the previously estimated range of $221.0 to $229.0 million, representing a year over year increase of 5.4% to 9.6%.

Conference Call Information

RINO’s management will hold an earnings conference call at 7 PM on November 16, 2010 U.S. Eastern Time (8 AM on November 17, 2010 Beijing/Hong Kong time), at which time management will discuss this quarter’s earnings results.

Dial-in details for the earnings conference call are as follows:


 


 

US:

+1-866-831-6224

 

International:

+1-617-213-8853

 

Hong Kong:

+852-3002-1672

 


 

Passcode:

16635766

 
   


A replay of the conference call may be accessed by phone at the following number until November 23, 2010:

US:

+1-888-286-8010

 

International:

+1-617-801-6888

 


 

Passcode:

78966921

 
   


Additionally, a live and archived webcast of this conference call will be available at http://ir.stockpr.com/rinointernational/.

About RINO International Corporation

RINO International Corporation is a leading provider of clean technology solutions to China’s iron and steel industry. RINO designs, manufactures, installs and services an extensive suite of products and solutions, including its patented wastewater treatment, flue gas desulphurization, high temperature anti-oxidation and sludge treatment systems, to a large customer base with the aim to reduce industrial pollution and improve energy utilization in China. With strong research and development capabilities, RINO currently has eight Chinese listed patents, three invention or utility model patents related to wastewater treatment, one utility model patent for its desulfurization system and one utility model patent for its waste incineration system. The Company also has invention patents for its anti-oxidation technology listed both in China and internationally under the Patent Cooperation Treaty. Seven patents are under application as of November 2010. For additional investor information, please visit http://ir.stockpr.com/rinointernational/.

Cautionary Statement Regarding Forward-Looking Information

Certain statement in this press release 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, and Quarterly Reports on Form 10-Q.

About Non-GAAP Financial Measures

The management of RINO International Corporation (herein "RINO") uses non-GAAP adjusted net earnings to measure the performance of the Company's business internally by excluding non-recurring items as well as special non-cash charges. The Company's management believes that these non-GAAP adjusted financial measures allow the management to focus on managing business operating performance because these measures reflect the essential operating activities of RINO and provide a consistent method of comparison to historical periods. The Company believes that providing the non-GAAP measures that management uses internally to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand RINO's financial performance in comparison to historical periods without variations caused by non-recurring items and non-operating related charges. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by the management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from GAAP financial measure. However, the management of RINO compensates for these limitations by providing the relevant disclosure of the items excluded.

The following table provides the non-GAAP financial measures and the

 

related GAAP measures and provides a reconciliation of the non-GAAP measure to

 

the equivalent GAAP measure.

 



 

Q3 2010

Q3 2009

 

GAAP Net Income

$ 8,839,220

$ 17,085,900

 

Change in fair value of warrants

$ 97,620

$ (2,592,201)

 

Adjusted Net Income

$8,741,600

$ 19,678,101

 

Adjusted EPS (Diluted)

$ 0.31

$ 0.78

 
     



CONTACT

 

 

In China:

 

 

Mr. Ben Wang

 

Chief Financial Officer

 

RINO International Corporation

 

Tel:    +86-411-8766-1828

 

Email:  benwang@rinogroup.com

 

 

Ms. Cynthia He

 

Brunswick Group LLP

 

Tel:    +86-10-6566-2256

 

Email:  rino@brunswickgroup.com

 

 

In the U.S.:

 

 

Ms. Cindy Zheng

 

Brunswick Group LLP

 

Tel:    +1-212-333-3810

 

Email:  rino@brunswickgroup.com

 
 




 

RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES 

 

CONSOLIDATED BALANCE SHEETS

 

AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

 




2010


2009

 




(UNAUDITED)



 

A S S E T S






 







 

CURRENT ASSETS






 

Cash and cash equivalents


$

56,123,490

$

134,487,611

 

Restricted cash



9,520,921


0

 

Notes receivable



209,580


440,100

 

Due from shareholders



0


3,500,000

 

Accounts receivable, trade, net of allowance for doubtful accounts of $666,161 and $273,446 as of September 30, 2010 and December 31, 2009, respectively



90,687,872


38,826,483

 

Accounts receivable - retentions



21,324,942


18,984,688

 

Costs and estimated earnings in excess of billings on uncompleted contracts



41,440,413


3,258,806

 

Inventories



5,546,475


5,405,866

 

Advances for inventory purchases



57,244,722


34,056,231

 

Other current assets and prepaid expenses



3,306,592


629,506

 

   Total current assets



285,405,007


239,589,291

 







 

PLANT AND EQUIPMENT, NET



24,516,034


12,265,389

 







 

OTHER ASSETS






 

Investment in unconsolidated affiliate



449,100


0

 

Advances for non current assets



11,745,655


6,570,378

 

Intangible assets, net



9,115,669


1,144,796

 

   Total other assets



21,310,424


7,715,174

 







 

     Total assets


$

331,231,465

$

259,569,854

 







 







 

L I A B I L I T I E S    A N D    S H A R E H O L D E R S'   E Q U I T Y





 







 

CURRENT LIABILITIES






 

Accounts payable


$

9,796,423

$

4,281,353

 

Short term bank loans



3,742,500


1,467,000

 

Notes payable



9,520,824


0

 

Billings in excess of costs and estimated earnings on uncompleted contracts



8,125,883


0

 

Customer deposits



232,894


4,984,801

 

Deferred revenue



3,229,242


0

 

Liquidated damages payable



20,147


20,147

 

Due to shareholders



498,598


494,614

 

Taxes payable



4,727,815


4,003,709

 

Other payables and accrued liabilities



512,862


496,411

 

   Total current liabilities



40,407,188


15,748,035

 







 

Long term loan



8,233,500


0

 







 

Warrant Liabilities



178


15,172,712

 







 

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)



0


0

 

Common Stock ($0.0001 par value, 10,000,000,000 shares authorized, 28,605,321 and 28,603,321 shares issued and outstanding as of  September 30, 2010 and December 31, 2009)



2,860


2,860

 

Additional paid-in capital



107,527,065


107,135,593

 

Retained earnings



123,344,860


78,983,794

 

Statutory reserves



15,326,220


11,755,312

 

Accumulated other comprehensive income



11,909,275


6,291,229

 

   Total shareholders' equity



258,110,280


204,168,788

 

     Total liabilities and shareholders' equity


$

331,231,465

$

259,569,854

 

 
             




 

RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

 

(UNAUDITED)

 











 


Three Months Ended September 30,


Nine Months Ended September 30,

 


2010

2009



2010

2009

 

REVENUES










 

Contracts

$

52,083,757

$

62,194,946


$

164,347,447

$

138,030,264

 

Services


640,803


1,107,257



1,620,028


1,602,308

 



52,724,560


63,302,203



165,967,475


139,632,572

 











 

COST OF SALES










 

Contracts


35,987,267


36,452,495



108,600,440


81,701,500

 

Services


242,423


531,440



737,072


1,124,270

 

Depreciation


211,379


185,201



566,821


555,528

 



36,441,069


37,169,136



109,904,333


83,381,298

 











 

GROSS PROFIT    


16,283,491


26,133,067



56,063,142


56,251,274

 











 

OPERATING EXPENSES










 

Selling, general and administrative expenses


6,031,527


6,562,870



17,802,865


14,079,888

 

Stock compensation expense


325,937


(9,263)



391,469


0

 

TOTAL OPERATING EXPENSES


6,357,464


6,553,607



18,194,334


14,079,888

 











 

INCOME FROM OPERATIONS


9,926,027


19,579,460



37,868,808


42,171,386

 











 

OTHER INCOME (EXPENSES), NET










 

Other expense, net


(13,772)


(3,144)



(127,651)


(8,923)

 

Change in fair value of warrants


97,620


(2,592,201)



15,172,534


(4,402,335)

 

Interest income (expense), net


323,898


101,785



464,342


(90,148)

 

Gain on liquidated damage settlement


0


0



0


1,746,120

 

TOTAL OTHER INCOME (EXPENSES), NET


407,746


(2,493,560)



15,509,225


(2,755,286)

 











 

INCOME BEFORE PROVISION FOR INCOME TAXES


10,333,773


17,085,900



53,378,033


39,416,100

 











 

PROVISION FOR INCOME TAXES


1,494,553


0



5,446,059


0

 











 

NET INCOME


8,839,220


17,085,900



47,931,974


39,416,100

 











 

OTHER COMPREHENSIVE INCOME:










 

Foreign currency translation adjustment


4,419,255


169,559



5,618,046


31,920

 











 

COMPREHENSIVE INCOME

$

13,258,475

$

17,255,459


$

53,550,020

$

39,448,020

 











 

WEIGHTED AVERAGE NUMBER OF SHARES:










 

Basic


28,604,061


25,204,199



28,605,321


25,104,972

 

Diluted


28,610,990


25,220,159



28,610,560


25,112,087

 











 

EARNINGS PER SHARE:










 

Basic

$

0.31

$

0.68


$

1.68

$

1.57

 

Diluted

$

0.31

$

0.68


$

1.68

$

1.57

 

 
                     




 

RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

 















 


Common Stock













 


Par Value $0.0001




Additional


Retained Earnings




Accumulated other



 


Number


Common


Paid-in


Unrestricted


Statutory


comprehensive



 


of shares


stock


capital


earnings


reserve


income


Totals

 

BALANCE, January 31, 2009

25,040,000

$

2,504

$

25,924,007

$

28,570,948

$

6,196,478

$

6,221,943

$

66,915,880

 















 

Cumulative effect of reclassification of warrants





(1,058,702)


(420,070)






(1,478,772)

 

Shares issued to settle liquidated damage payable

48,438


5


216,999








217,004

 

Stock compensation expense-shares and options issued

2,000


0


28,324








28,324

 

Imputed interest on advances from a shareholder





13,557








13,557

 

Non cash exercise of warrant at $5.38

240,331


24


5,368,585








5,368,609

 

Net income







39,416,100






39,416,100

 

Allocation to statutory reserve







(4,295,048)


4,295,048




0

 

Foreign currency translation gain











31,920


31,920

 















 

BALANCE, September 30, 2009 (Unaudited)

25,330,769

$

2,533

$

30,492,770

$

63,271,930

$

10,491,526

$

6,253,863

$

110,512,622

 















 

Stock compensation expense





19,061








19,061

 

Non cash exercise of warrant at $5.38

20,520


2


512,496








512,498

 

Stock issuance for cash for $30.75

3,252,032


325


76,111,266








76,111,591

 

Net income







16,975,650






16,975,650

 

Allocation to statutory reserve







(1,263,786)


1,263,786




0

 

Foreign currency translation gain











37,366


37,366

 















 

BALANCE, December 31, 2009

28,603,321

$

2,860

$

107,135,593

$

78,983,794

$

11,755,312

$

6,291,229

$

204,168,788

 















 

Stock compensation expense

2,000


0


391,472








391,472

 

Net income







47,931,974






47,931,974

 

Allocation to statutory reserve







(3,570,908)


3,570,908




0

 

Foreign currency translation gain











5,618,046


5,618,046

 















 

BALANCE, September 30, 2010 (Unaudited)

28,605,321


2,860


107,527,065


123,344,860


15,326,220


11,909,275


258,110,280

 

 
                             




 

RINO INTERNATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

 

(UNAUDITED)

 








 





2010


2009

 








 

CASH FLOWS FROM OPERATING ACTIVITIES





 

Net income

$

47,931,974

$

39,416,100

 

Adjustments to reconcile net income to cash (used in) provided by operating activities:





 


Depreciation


706,358


717,490

 


Amortization


143,025


50,072

 


Allowance for bad debt


380,399


342,495

 


Imputed interest on advances from shareholders


0


13,558

 


Amortization of long term prepaid expenses


58,914


10,994

 


Stock compendation expense


391,472


28,324

 


Liquidated damage settlement expense


0


(1,746,120)

 


Change in fair value of warrants


(15,172,534)


4,402,335

 

Changes in operating assets and liabilities:





 


Notes receivable


235,360


1,439,514

 


Accounts receivable


(52,478,965)


6,596,159

 


Costs and estimated earnings in excess of billings on uncompleted contracts


(37,452,981)


(13,192,194)

 


Inventories


(29,537)


(589,505)

 


Advances for inventory purchases


(22,101,402)


(34,747,048)

 


Other current assets and prepaid expenses


(2,618,152)


(160,940)

 


Accounts payable


5,333,251


(344,598)

 


Customer deposits


(4,769,544)


102,598

 


Billings in excess of costs and estimated earnings on uncompleted contracts


7,984,752


1,483,440

 


Other payables and accrued liabilities


6,294


(318,983)

 


Deferred revenue


3,173,157


0

 


Due to shareholders


3,704


(1,058,480)

 


Taxes payable


631,076


5,946,440

 



Net cash (used in) provided by operating activities


(67,643,379)


8,391,651

 








 

CASH FLOWS FROM INVESTING ACTIVITIES





 

Payment for investment in unconsolidated affiliate


(441,300)


0

 

Purchase of plant and equipment


(12,499,236)


(37,232)

 

Advances for non current assets


(5,012,306)


(341,417)

 

Purchase of intangible assets


(7,952,455)


0

 


Net cash used in investing activities


(25,905,297)


(378,649)

 








 

CASH FLOWS FROM FINANCING ACTIVITIES





 

Change in restricted cash


(9,355,561)


1,030,317

 

Proceeds from notes payable - banks


9,355,466


73,735

 

Proceeds from short term bank loans


2,206,500


29,360,000

 

Payments on short term bank loans


0


(29,315,000)

 

Payments on liquidated damage settlement


0


(615,018)

 

Proceeds from shareholder


3,500,000


770,889

 

Proceeds from long-term bank loans


8,090,500


0

 


Net cash provided by financing activities


13,796,905


1,304,923

 








 

EFFECT OF EXCHANGE RATE ON CASH


1,387,650


(39,665)

 








 

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(78,364,121)


9,278,260

 








 

CASH AND CASH EQUIVALENTS, beginning


134,487,611


19,741,982

 








 

CASH AND CASH EQUIVALENTS, ending

$

56,123,490

$

29,020,242

 








 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION





 

Cash paid for interest expense

$

403,217

$

632,816

 

Cash paid for income taxes

$

1,752,393

$

229,848

 

Reclassification of advances on plant to purcahse of plant


10,703,204


0

 

Shares issued for liquidated damage penalty settlement

$

0

$

217,004

 

 
               
Source: RINO International Corporation
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