BEIJING, August 15, 2013 /PRNewswire-FirstCall/ -- Tri-Tech Holding Inc. (Nasdaq: TRIT), which provides turn-key water resources management, water and wastewater treatment, industrial safety and pollution control solutions, announced its financial performance for the second quarter ended June 30, 2013.
(Logo: http://www.newscom.com/cgi-bin/prnh/20100603/CNTH016LOGO )
In discussing second quarter results, Mr. Gavin Cheng, CEO of Tri-Tech Holding Inc. commented, "Despite an overall deterioration in financial results compared to that from the same period in 2012, the Company saw a recovery in operations when compared to that of first quarter 2013: our revenue increased by 55%, our operating expenses margin declined by 15% and our gross margin maintained relatively the same at 22.3%." Management ascribes the recovery to:
Moving forward, the Company will further such efforts to continue on the course of recovery."
Highlights from the Company's second quarter 2013 performance include the following:
2013 Q2 Financial Performance Metrics
Revenue
Our total revenues for the second quarter of 2013 were $16,284,617, a decrease of 29.3%, compared with the amount for the same period last year. Revenue from the Ordos project decreased from $1,855,180 for the period ended June 30, 2012 to $848,403 in the same period 2013 because the project was primarily completed; India projects didn't recognize revenue in the second quarter of 2013, mainly because the customer underestimated of the construction environment and there were redesigns, while in the same period of 2012, India projects recognized a revenue of $4.0 million. In order to reduce cash flow pressures, we evaluated the projects we planned to bid on and elected not to bid on domestic BT projects, which typically require significant investments and feature slower client payment periods.
Gross Margin
Our gross margin decrease was largely a result of increases in material and equipment costs and labor subcontracting costs.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of compensation, marketing, travel and business entertainment expenses. In the second quarter of 2013, total selling and marketing expenses decreased by 9.1%, from $935,853 in the second quarter of 2012 to $850,551 in the same period of 2013. The compensation-related expenses increased by 17.6% from $396,291 in the second quarter of 2012 to $466,200 in the same period of 2013 due to the compensation for laying off selling and marketing employees. Traveling expenses, entertainment expenses and other expenses declined by $155,211 because of budget controls; therefore, the total selling and marketing expenses decreased.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation costs, rental expenses, professional fees, and other overhead expenses. General and administrative expenses decreased by $604,506 from $3,247,546 in the second quarter of 2012 to $2,643,040 in the second quarter of 2013. Of this decrease, $26,206 was for officers' salaries. Salaries for mid-level management, technical support team, and other office staff decreased by $78,792 from the amount in the second quarter of 2012 to the amount in the second quarter of 2013. Rental expenses decreased by $25,426 from the amount in the second quarter of 2012 to the amount in the second quarter of 2013, because the Company stopped to rent some of the office space in Beijing. Other general and administrative expenses decreased by $383,380 from the amount in the second quarter of 2012 to the amount in the second quarter of 2013, including mainly office expenses, utilities, travel, communication, other services support and bad debt expenses. We had a $96,954 non-cash option expense as a part of other general and administrative expense in the second quarter 2013 and $439,675 in the same period of 2012, which also contributed to the decrease of general and administrative expense.
Loss before Income Taxes
In the second quarter ended June 30, 2013, our net loss before provision for income taxes was $715,779, a decrease of $2,310,568 compared to that of $1,594,789 in the same period in 2012. The Company's provision for income taxes decreased by 65.3%, from the amount in the second three months of 2012 to the amount in the same period in 2013. In the second period ended June 30, 2013, net loss attributable to the shareholders of TRIT was $ 602,020, a decrease of 143.9%, from net income of $1,370,887 for the same period in 2012, mainly due to the significant decline of revenues.
Liquidity and Capital Resources
Our liquidity and available capital resources are impacted by four key components: (i) cash and cash equivalents, (ii) operating activities, (iii) financing activities, and (iv) investing activities.
Cash and Cash Equivalents
As of June 30, 2013, our cash and cash equivalents amounted to $5,506,711. The restricted cash as of June 30, 2013 and December 31, 2012 amounted to $16,678,766 and $7,816,967, respectively, which are not included in the total amount of cash and cash equivalents. The restricted cash consisted of deposits as collateral for the issuance of letters of credit. Our subsidiaries that own these deposits do not have material cash obligations to any third parties. Therefore, the restriction does not impact our liquidity.
Operating Activities
Net cash used in operating activities was $8,470,131 for the six months ended June 30, 2013, compared with net cash used in operating activities of $8,297,972 in the same period in 2012. The increase of $172,159 in operating cash outflow was due to the received payment of $11.5 million from Ordos project in March 2013 and reduced by the prepayments to various suppliers for projects. Net accounts and notes receivable increased from $18,598,110 as of December 31, 2012 to $23,473,583 as of June 30, 2013, an increase of 26.2%. Current unbilled receivables increased from $27,954,525 as of December 31, 2012 to $32,346,776 as of June 30, 2013, an increase of 15.7%.
Investing Activities
Net cash provided by investing activities was $9,379,917 during the six months ended June 30, 2013, an increase of $9,486,306 from net cash used in investing activities of $106,389 in the same period of 2012. The increase was attributed to the advance payment from the real property buyer of Baoding. Currently we have no further plans to add capital expenditures.
Financing Activities
The cash provided by financing activities was $6,288,392 for the six months ended June 30, 2013, compared to cash provided by financing activities of $5,409,603 in the same period of 2012. The increase was due to the proceeds from bank borrowings, loan from third-party companies and noncontrolling shareholders.
Restricted Net Assets
Our ability to pay dividends is primarily dependent on receiving distributions of funds from our subsidiaries, VIEs and other affiliated entities, which is restricted by certain regulatory requirements. Relevant Chinese statutory laws and regulations permit payments of dividends by our Chinese affiliates only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, our PRC affiliates are required to set aside at least 10% of their after-tax profit after deducting any accumulated deficit based on PRC accounting standards each year to our general reserves until the accumulated amount of such reserves reach 50% of our registered capital. These reserves are not distributable as cash dividends. Our off-shore subsidiaries, TIS and Tri-Tech International Investment, Inc. ("TTII"), do not have material cash obligations to third parties. Therefore, the dividend restriction does not impact our liquidity. There is no significant difference between accumulated profit calculated pursuant to PRC accounting standards and our accumulated profit calculated pursuant to U.S. GAAP. As of June 30, 2013 and December 31, 2012, restricted retained earnings were $2,246,910 for both, and restricted net assets were $1,878,976 and $4,878,975, respectively. Unrestricted retained earnings as of June 30, 2013 and December 31, 2012 were $15,337,603 and $17,038,396, respectively, which were the amounts available for distribution in the form of dividends or for reinvestment.
Working Capital and Cash Flow Management
As of June 30, 2013, our working capital was $21,955,413, with current assets totaling $106,325,297 and current liabilities totaling $84,369,884.
We believe our current assets are sufficient to meet our capital requirements for the next 12 months. However, we may require additional cash to undertake larger projects or to complete strategic acquisitions in the future. In the event our current capital is insufficient to fund these and other business plans, we may take the following actions to meet such working capital needs:
We plan to sell our real property in Baoding, along with all construction including the costs of construction and operation expended since acquisition for approximately $18 million. We acquired this property on November 26, 2010. The sale is expected to close before the end of 2013 and we expect to break even on the sale. We expect to use these funds to support our operating cash flow and to repay the corporate bond from financing cash flow.
Order Backlog and Pipeline
The Company's backlog represents the amount of contract work remaining to be completed, that is, revenues from existing contracts and work in progress expected to be recognized in current period, based on the assumption that these projects will be completed on time according to the project schedules. The Company evaluates the ongoing projects regularly and updates the schedules as appropriate.
The following table provides backlog by segments for as of June 30, 2013 and December 31, 2012, respectively.
June 30, 2013 | December 31, 2012 | |||||
USD Million | % of Total Backlog | USD Million | % of Total Backlog | % Change | ||
Segment 1: | 36.6 | 66.3% | 38.7 | 64.4% | (5.4) | % |
Segment 2: | 6.3 | 11.4% | 6.7 | 11.1% | (6.4) | % |
Segment 3: | 12.3 | 22.3% | 14.7 | 24.5% | (16.6) | % |
Total | 55.2 | 100.0% | 60.1 | 100.0% | (8.2) | % |
Pipeline represents the values of projects we have been actively pursuing. The pipeline as of June 30, 2013 and December 31, 2012 was as below:
June 30, 2013 | December 31, 2012 | |||||
USD Million | % of Total Pipeline | USD Million | % of Total Pipeline | % Change | ||
Segment 1: | 20.3 | 29.4% | 50.7 | 57.6% | (60.0) | % |
Segment 2: | 18.5 | 26.8% | 2.5 | 2.8% | 640.0 | % |
Segment 3: | 30.3 | 43.8% | 34.8 | 39.5% | (12.9) | % |
Total | 69.1 | 100.0% | 88.0 | 100.0% | (21.5) | % |
Having a dynamic nature, the values of secured projects move from pipeline into backlog and backlog to revenue based on percentage of completion, sometimes simultaneously. The backlog decreased by $5.0 million from December 31, 2012 to June 30, 2013, because of the projects' progress in the second quarter of 2013. Being rigorous in project selection also narrowed down the number of candidate projects.
Conference Call
Tri-Tech Chairman Warren Zhao, CEO Gavin Cheng, CFO & President Phil Fan and COO Peter Dong will host a conference call at 9:00AM EDT, August 15, 2013, (9:00PM Beijing/Hong Kong Time on August 15, 2013) to review the company's financial results and outlook of operations, to discuss our growth strategies and to respond to questions and comments.
To participate, call U.S. toll free number (877) 941- 8416 approximately 10 minutes before the call. International callers, please dial 1 (480) 629 - 9808. The conference ID number is 4635095. A live and archived webcast of the call will be available at http://public.viavid.com/index.php?id=105720.
-FINANCIAL TABLES -
TRI-TECH HOLDING INC. AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
June 30, 2013 | December 31, | |||
(Unaudited) | 2012 | |||
ASSETS | ||||
Current assets | ||||
Cash* | $ | 5,506,711 | $ | 8,098,657 |
Restricted cash* | 14,095,989 | 4,352,443 | ||
Accounts and notes receivable, net of allowance for doubtful accounts of $1,735,507 and $1,475,771 as of June 30, 2013 and December 31, 2012, respectively* | 31,841,682 | 18,598,110 | ||
Unbilled revenue* | 23,978,677 | 27,954,525 | ||
Other current assets* | 3,724,019 | 3,825,770 | ||
Inventories* | 10,431,357 | 8,459,073 | ||
Deposits on projects* | 1,193,325 | 1,469,550 | ||
Prepayments to suppliers and subcontractors* | 15,553,537 | 9,353,490 | ||
Total current assets | 106,325,297 | 82,111,618 | ||
Long-term unbilled revenue* | 45,327,393 | 51,219,694 | ||
Long-term accounts receivable | 746,583 | 413,770 | ||
Plant and equipment, net* | 1,685,334 | 1,764,784 | ||
Construction in progress | 5,786,168 | 5,359,466 | ||
Intangible assets, net* | 10,684,790 | 10,902,932 | ||
Long-term restricted cash | 2,582,777 | 3,464,524 | ||
Goodwill | 1,441,278 | 1,441,278 | ||
Total Assets | $ | 174,579,620 | $ | 156,678,066 |
LIABILITIES AND EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 6,669,304 | $ | 5,890,511 |
Costs accrual on projects* | 24,071,455 | 23,637,751 | ||
Advance from customers* | 1,442,889 | 1,157,247 | ||
Advance from potential buyer of assets | 8,979,565 | - | ||
Loans from third party companies and individuals* | 10,214,396 | 6,400,659 | ||
Amount due to noncontrolling interest investor | 6,817,202 | 9,047,068 | ||
Amount due to related party | 1,682,143 | 1,656,420 | ||
Other payables* | 663,962 | 461,258 | ||
Taxes payable* | 6,362,946 | 5,577,533 | ||
Accrued liabilities* | 504,185 | 485,354 | ||
Payable on investment consideration | 582,966 | 582,966 | ||
Deferred income taxes* | 1,803,240 | 1,782,786 | ||
Deferred revenue | 241,193 | 289,485 | ||
Short-term bank borrowing (including VIE short-term borrowing of the consolidated VIEs without recourse to Tri-Tech Holdings of $9,108,192 and $2,754,158 as of June 30, 2013 and December 31, 2012, respectively)* | 13,962,011 | 8,150,041 | ||
Total current liabilities | 83,997,457 | 65,119,079 | ||
Noncurrent deferred income taxes | 3,801,078 | 3,699,790 | ||
Long-term bank borrowings | 13,545 | 17,976 | ||
Corporate Bond | 7,935,122 | 7,935,122 | ||
Total Liabilities | 95,747,202 | 76,771,967 | ||
Equity | ||||
Tri-Tech Holding Inc. shareholders' equity | ||||
Ordinary shares ($0.001 par value, 30,000,000 shares authorized; 8,274,506 and 8,259,506 shares issued as of June 30, 2013 and December 31, 2012, respectively; 8,253,406 and 8,238,406 shares outstanding as of June 30, 2013 and December 31, 2012, respectively) | 8,274 | 8,259 | ||
Additional paid-in-capital | 50,354,573 | 50,119,428 | ||
Statutory reserves | 2,246,910 | 2,246,910 | ||
Retained earnings | 15,337,603 | 17,038,396 | ||
Treasury shares (21,100 shares in treasury as of June 30, 2013 and December 31, 2012, respectively) | (193,750) | (193,750) | ||
Accumulated other comprehensive income | 5,774,960 | 5,086,827 | ||
Total Tri-Tech Holding Inc. shareholders' equity | 73,528,570 | 74,306,070 | ||
Noncontrolling interests | 5,303,848 | 5,600,029 | ||
Total equity | 78,832,418 | 79,906,099 | ||
Total Liabilities and Equity | $ | 174,579,620 | $ | 156,678,066 |
TRI-TECH HOLDING INC. AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||
For The Three Months Ended June 30, | |||||
2013 | 2012 | ||||
(Unaudited) | (Unaudited) | ||||
Revenues: | |||||
System integration | 13,122,252 | 21,741,770 | |||
Hardware products | 3,162,365 | 1,298,764 | |||
Total revenues | 16,284,617 | 23,040,534 | |||
Cost of revenues | |||||
System integration | 9,906,489 | 16,608,958 | |||
Hardware products | 2,750,880 | 607,510 | |||
Total cost of revenues | 12,657,369 | 17,216,468 | |||
Gross profit | 3,627,248 | 5,824,066 | |||
Operating expenses: | |||||
Selling and marketing expenses | 850,551 | 935,853 | |||
General and administrative expenses | 2,643,040 | 3,247,546 | |||
Research and development expenses | 182,912 | 11,528 | |||
Total operating expenses | 3,676,503 | 4,194,927 | |||
(Loss) income from operations | (49,255) | 1,629,139 | |||
Other expense: | |||||
Other income (expense), net | (18,536) | 410,889 | |||
Interest income | 18,903 | 40,770 | |||
Interest expense | (666,891) | (559,158) | |||
Investment gain | - | 73,149 | |||
Total other expenses | (666,524) | (34,350) | |||
(Loss) income before provision for income taxes | (715,779) | 1,594,789 | |||
Provision for income taxes | 99,644 | 287,062 | |||
Net (loss) income | (815,423) | 1,307,727 | |||
Less: Net loss attributable to noncontrolling interests | (213,403) | (63,160) | |||
Net (loss) income attributable to Tri-Tech Holding Inc. shareholders | $ | (602,020) | $ | 1,370,887 | |
Net (loss) income | (815,423) | 1,307,727 | |||
Other comprehensive income | |||||
Foreign currency translation adjustment | 985,913 | 95,884 | |||
Comprehensive income | 170,490 | 1,403,611 | |||
Less: Comprehensive loss attributable to noncontrolling interests | (111,230) | (56,632) | |||
Comprehensive income attributable to Tri-Tech Holding Inc. | $ | 281,720 | $ | 1,460,243 | |
Weighted average number of ordinary shares outstanding: | |||||
Basic | 8,253,406 | 8,207,427 | |||
Diluted | 8,253,406 | 8,207,427 | |||
Net (loss) income attributable to Tri-Tech Holding Inc. shareholders per share are: | |||||
Basic | $ | (0.07) | $ | 0.17 | |
Diluted | $ | (0.07) | $ | 0.17 | |
TRI-TECH HOLDING INC. AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For The Six Months Ended June 30, | ||||
2013 | 2012 | |||
(Unaudited) | (Unaudited) | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net (loss) income | $ | (2,062,680) | $ | 2,740,416 |
Adjustments to reconcile net (loss) income to cash provided by operating activities: | ||||
Amortization of share-based compensation expense | 235,145 | 530,588 | ||
Depreciation and amortization | 643,102 | 582,513 | ||
Provision for doubtful accounts | 228,656 | 243,367 | ||
Fair value change on contingent investment consideration | - | (7,000) | ||
Loss on disposal of plant and equipment | 16,702 | - | ||
Gain on investment in joint venture | - | (78,558) | ||
Deferred income taxes | (41,007) | 472,578 | ||
(Increase) decrease in current assets : | ||||
Accounts receivable | (13,284,694) | (3,492,534) | ||
Unbilled revenue | 10,491,452 | (11,925,515) | ||
Restricted cash | 205,683 | - | ||
Other current assets | 474,278 | (907,482) | ||
Inventories | (1,964,231) | 1,164,228 | ||
Prepaid expenses | (21,095) | (145,032) | ||
Prepayments | (5,575,111) | (3,513,501) | ||
(Increase) decrease in current liabilities : | ||||
Accounts payable | 592,229 | (3,495,129) | ||
Notes payable | - | (871,833) | ||
Cost accrual on projects | 753,716 | 4,560,906 | ||
Advance from customers | (232,865) | 1,392,326 | ||
Other payables | 751,897 | 4,585,357 | ||
Taxes payable | 398,981 | (66,531) | ||
Accrued liabilities | (26,902) | (67,136) | ||
Deferred revenue | (53,387) | - | ||
Net cash used in operating activities | $ | (8,470,131) | $ | (8,297,972) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Restricted cash received | - | 348,969 | ||
Restricted cash related to advance from potential buyer of assets | (8,979,565) | - | ||
Advance from potential buyer of assets | 8,979,565 | |||
Payment in business acquisition | - | (35,273) | ||
Cash paid on investment consideration | - | (75,159) | ||
Cash acquired from business combination | - | 31,336 | ||
Cash proceeds from disposal of PPE | 27,405 | - | ||
Payment to purchase plant and equipment | (108,709) | (205,204) | ||
Cash paid to acquire intangible asset | - | (36,970) | ||
Cash paid for construction in progress | (319,048) | (164,126) | ||
Payment of loan to third-party companies | - | 665,885 | ||
Collection of loan to third-party companies | - | (423,069) | ||
Net cash (used in) provided by investing activities | $ | (400,352) | $ | 106,389 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Proceeds from bank borrowings | 7,518,779 | 8,538,745 | ||
Payment of bank borrowing | (1,925,854) | (1,753,987) | ||
Proceeds from amount due to shareholder | 6,491 | |||
Proceeds from loan from third-party companies and individuals | 5,712,976 | 215,620 | ||
Payment of loan from third-party companies and individuals | (2,125,078) | (379,499) | ||
Proceeds from loan from non-controlling shareholders | 776,865 | |||
Payment of loan from non-controlling shareholders | (2,898,922) | (1,988,141) | ||
Net cash provided by financing activities | $ | 6,288,392 | $ | 5,409,603 |
EFFECTS OF EXCHANGE RATE CHANGE IN CASH | (9,855) | 408,797 | ||
DECREASE IN CASH | $ | (2,591,946) | $ | (2,373,183) |
CASH, beginning of the period | 8,098,657 | 11,935,746 | ||
CASH, end of the period | 5,506,711 | 9,562,563 | ||
Supplemental disclosure for cash flow information: | ||||
Income taxes paid | 108,777 | 154,361 | ||
Interest paid on debt | 836,104 | 386,107 | ||
Supplemental disclosure for noncash investing activity: | ||||
Issued 30,207 and 35,974 ordinary shares as one of the consideration in business combination | - | 229,875 | ||
Gain on long-term investment to India Joint Venture | - | 78,558 | ||
Fair value change on contingent consideration payable | - | 7,000 | ||
About Tri-Tech Holding Inc.
Tri-Tech is an innovative provider of consulting, engineering, procurement, construction and technical services. The Company supports government, state owned entities and commercial clients by providing efficiency oriented solutions focused on treatment of water and waste water, management of water resources and water-efficient irrigation, as well as industrial emission and safety controls. With software copyrights, product patents, and capable employees in China, the U.S. and India, Tri-Tech's capabilities span the cycle of innovation. Please visit www.tri-tech.cn for more information.
An online investor kit including a company profile, presentations, press releases, current price quotes, stock charts and other valuable information for investors is available at http://www.tri-tech.cn/ir. To subscribe to future releases via e-mail alert, visit http://www.tri-tech.cn/ir/info/request .
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. 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.
For more information, please contact:
Tri-Tech Holding Inc.
www.tri-tech.cn
IR Department
+86 10 57323666
ir@tri-tech.cn
