CHINA INDUSTRIAL WASTE MANAGEMENT, INC. 
By DALIAN, China, Nov. 15, 2010 /PRNewswire-Asia-FirstCall/ -- China Industrial Waste Management, Inc. (OTC Bulletin Board: CIWT) ("China Industrial Waste Management" or the "Company"), a leading environmental services and solutions provider in China, today announced its results for the three and nine months ended September 30, 2010.
Third Quarter Highlights
-- Revenues increased 47.6% to $4.6 million compared to the third quarter
of 2009
-- Gross profit increased 24.0% to $2.4 million
-- Operating income increased 69.9% to $1.3 million
-- Operating margin increased to 29.1% from 25.3%
-- Net income increased 46.8% to $1.0 million, or $0.06 per diluted share,
compared to $0.7 million, or $0.05 per diluted share for the same period
last year.
"Our strong third quarter results were the result of the continued growth of our Dontai Organic sludge treatment business and higher selling prices and sales volumes of recycled commodities," said Mr. Jason Dong, Chairman and Chief Executive Officer. "While our gross profit margin was off slightly as our sludge treatment business has not yet reached full capacity, every other significant financial measure showed improved.The need within China for environmentally-sound waste disposal methods is at a historic high and we believe we are well-positioned to provide solutions to this growing market. "
Third Quarter 2010 Results
Revenues increased 47.6% to $4.6 million from $3.1 million in the same period last year. The increase in revenues is mainly attributable to an increase in the Company's solid waste treatment business as production volumes from the Company's industrial customers continue to recover from the lows of 2009, and the additional revenue generated by Dongtai Organic from municipal sludge treatment, as well as sales of biogas (methane), a byproduct derived from sludge fermentation.
Revenues from service fees increased 33.5% to $2.7 million, or 59.1% of total revenues, from $2.0 million, or 65.3% of total revenues, in the prior year period. The increase is mainly attributable to the addition of $0.6 million in sludge treatment fees from Dongtai Organic, which was not operational during the same period in 2009. (Dongtai Organic began operations in the first quarter 2010.)
Sales of recycled commodities increased 74.1% to $1.9 million, or 40.9% of revenues, compared to $1.1 million, or 34.7% of revenues, in the same period last year. The rise is attributable to higher selling prices and sales volume for these products. China's economy continued its strong growth during the third quarter of 2010. Market prices for many raw materials, including for Dalian Dongtai's main products, cupric sulfate and other recycled commodities such as iron, plastic and nonferrous metal, which increased during the first half of 2010, began to stabilize during the third quarter. For example, the average price for cupric sulfate has stabilized at about $1,700 per ton, while the average price for the same period of 2009 was approximately $1,160 per ton. Many of the Company's customers have returned to their pre-recession production levels and some of them have further expanded their production scale. As a natural consequence of all these factors, the amount of recycled commodities collected from the Company's clients increased as well. Based on management's estimate of future market conditions, Dalian Dongtai has decided to increase the sales volume of recycled commodities, including some commodities that had been inventoried during 2009 due to their low sales prices.
Gross profit increased 24.0% to $2.4 million from $1.9 million in the same period last year. Gross margin was 52.1% compared to 62.1% in the prior year period. The decline in gross margin is primarily attributable to the additional overhead imposed by Dongtai Organic's sludge treatment operations, a recently-added business line which has not yet reached full capacity.
Income from operations increased 69.9% to $1.3 million from $0.8 million in the prior year period. Operating margin increased 380 basis points to 29.1% from 25.3% in the prior year period. The increase in operating margin is primarily due to operating leverage from the Company's higher level of sales.
Net income increased 46.8% to $1.0 million from $0.7 million in the same period last year. Diluted earnings per share increased 27.5% to $0.06 from $0.05 in the same period last year.
Nine Month Results
Revenues increased 89.6% to $13.6 million from $7.2 million in the same period last year. Revenues from service fees increased 82.3% to $8.9 million, or 65.3% of total revenues, from $4.9 million, or 67.9% of total revenues, in the prior year period. Sales of recycled commodities increased 105.2% to $4.7 million, or 34.7% of revenues, compared to $2.3 million, or 32.1% of revenues, in the same period last year.
Gross profit increased 85.0% to $8.1 million from $4.4 million in the same period last year. Gross margin was 59.7% compared to 61.2% in the prior year period.
Income from operations increased 214.3% to $4.7 million from $1.5 million in the prior year period. Operating margin increased to 34.8% from 21.0% in the prior year period.
In the first quarter of 2010, the Company and a consulting firm, which provided business advisory and private placement services to the Company, signed a Settlement and Release Agreement to resolve all remaining issues between them. As part of this agreement the Company incurred a one-time, non-cash settlement expense during the first quarter of $0.4 million.
Net income increased 113.6% to $2.8 million from $1.3 million in the same period last year. Diluted earnings per share increased 85.8% to $0.16 from $0.09 in the same period last year adjusted net income, excluding the impact of the aforementioned one-time, non-cash settlement expense was $3.3 million, or $0.19 per diluted share.
Financial Condition
As of September 30, 2010, the Company had accounts receivable of $4.7 million compared to $2.0 million as of December 31, 2009. The 131.8% increase is primarily due to Dalian Dongtai's increase in sales as its customers ramped up their production levels and produced more waste and Dongtai Organic, which had service fees due from the local government for sludge treatment services rendered and sales of methane gas. .
As of September 30, 2010, the Company had cash and cash equivalents of $4.6 million compared to $11.4 million as of December 31, 2009. The decrease is mainly due to the repayment of bank loans. As of September 30, 2010, the Company had a working capital surplus of $2.6 million compared to a surplus of $1.7 million as of December 31, 2009. During the first nine months of 2010, operating cash flow was $2.7 million versus $0.1 million in the prior year period.
Recent Developments
-- In October, 2010, the Company announced Dalian Dongtai was designated as
the sole provider of dismantling, processing and recycling services for
discarded domestic appliances for Dalian City, and one of four licensed
providers of these services in Liaoning Province under the Discarded
Domestic Appliance Recycling Program (the "Appliance Recycling
Program"), which is sponsored by the PRC ministries of Commerce,
Treasury, and Environmental Protection. The Appliance Recycling Program
began in August 2010 in Dalian and runs through the end of December
2011. As a result of its designation and participation in this program,
the Company expects to generate $2 million in revenues over the
program's 17-month duration.
-- In August 2010, the Company's Dongtai Organic sewage sludge treatment
facility in Dalian, Liaoning Province, which utilizes anaerobic
fermentation to generate clean energy methane gas, was voted "Best
Sewage Sludge Process Application of China" at the 2nd Water Specialist
Conference which was held in Shanghai on August 31, 2010.
-- In August 2010, Dalian Dongtai signed a waste management cooperation
contract with Dalian Onoda Cement Co., Ltd. to process industrial waste
utilizing Dalian Onoda's cement kiln. Dalian Onoda Cement Co., Ltd is a
cement production venture owned by Taiheiyo Cement Co., Ltd., a leading
multinational cement producer in Japan. The current hazardous waste
management capacity of the facilities operated by Dalian Dongtai is
56,000 tons per year. Through its cooperation with Dalian Onoda, the
Company expects Dalian Dongtai to be able to increase its current
hazardous waste management capacity by 36% or 20,000 tons per year
immediately and by 125% to 143% or 70,000 to 80,000 tons per year within
the next five years.
-- In August 2010, China Industrial Waste Management signed a major waste
management contract with a national petrochemical firm located in
Liaoning Province (the "Customer"). Under the terms of the contract,
beginning on September 1, 2010, Dalian Dongtai will treat and dispose of
the industrial waste sludge and slag generated by the Customer's
production over the next 30-months, which the Customer estimates will
total approximately 40,000 tons. Based on this expected volume, Dalian
Dongtai anticipates it will generate an additional $3.65 million in
revenues from this Customer over the life of the 30-month contract.
-- In July 2010, China Industrial Waste Management was approached to lead
the oil waste management operation following China's largest recorded
oil spill off the coast of Dalian City. The Company was asked to handle
oil waste generated by the effort, including oil skimmed off the ocean
surface and oil-saturated equipment and refuse such as used absorption
felts.
-- In July 2010, the Company received a government subsidy of RMB 5 million
(approximately $0.7 million) to complete its capacity expansion project
for a centralized hazardous waste treatment facility (the "Expansion
Project") in Dalian, Liaoning Province, China. This subsidy is the
second installment of a series to be disbursed by the government as the
Expansion Project progresses.
Business Outlook
The Company's Dalian Dongtai subsidiary is currently building one of the most advanced one-stop service centers for industrial solid waste treatment in China (the "Expansion Project"). The construction of this Expansion Project is now 80% complete and we expect it to become operational in the second quarter of 2011. Once fully ramped up, this new facility will provide Dalian Dongtai with 114,000 tons per annum of industrial solid waste treatment capacity, which is double the capacity of the current plant.
The Company's Dongtai Organic operates the first BOT (Build-Operate-Transfer) plant in China using anaerobic fermentation technology. This is a build-operate-transfer or 'BOT' project with a 20-year franchise period. During this period, this sludge-to-energy plant is expected to dispose of the sludge derived from all of the sewage treatment plants located in urban Dalian City. This plant has a designed capacity of 600 tons per day and is expected to generate approximately 11,000 cubic meters of methane gas once it reaches its full capacity, which is expected to happen within two years. As a first-mover in this space in China and having Dongtai Organic function as a demonstration project in Dalian, the Company is well positioned to promote our sludge treatment facility engineering business across the country. The Company's expertise is in-line with the Chinese government's goal of encouraging sustainable and environmentally friendly development.
Mr. Dong concluded, "We are optimistic about our prospects. The environmental protection industry in China is growing faster than China's overall rapid GDP growth rate and we are an industry leader in this rapidly developing industry. Our Dalian Dongtai business has a strong track record of developing and operating industrial waste treatment systems with over 770 customers, including major multinational companies. From our dominant position in Dalian, a major industrial center that is a hub for shipbuilding and other heavy industries, we intend to continue to build out our environmentally-conscious waste processing capabilities and look forward to doubling our capacity in this area with our new Expansion Project which we expect to come online next year.
"We have focused our efforts on developing next generation solutions for China's waste challenges, including a state-of-the-art anaerobic sludge treatment facility operated by Dongtai Organic. We anticipate that the Dongtai Organic facility will continue to positively contribute to our financial performance as the project approaches full capacity. In addition, we are actively seeking new opportunities to utilize our expertise in this area to lead similar projects in other regions of China."
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time on Monday, November 15, 2010, to discuss its financial results for the third quarter of 2010.
To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (877) 331 - 5105. International callers should dial +1 (631) 865 - 5293. The Conference Pass Code is 23560177.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, November 15, 2010, at 10:00 a.m. Eastern Time. To access the replay, call (800) 642-1687. International callers should call +1 (706) 645-9291. The Conference Pass Code is 23560177.
Use of Adjusted Financial Measures
GAAP results for the nine months ended September 30 , 2010 include a one-time non-cash charge related to the Company's settlement expense. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of this item in this release. It is a departure of U.S. GAAP, however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About China Industrial Waste Management, Inc.
China Industrial Waste Management, Inc. is engaged in the collection, treatment, disposal and recycling of industrial wastes principally in Dalian and surrounding areas in Liaoning Province, People's Republic of China through its 90%-owned subsidiary Dalian Dongtai Industrial Waste Treatment Co., Ltd. ("Dalian Dongtai") and other indirect subsidiaries. Dalian Dongtai treats, disposes of and/or recycles many types of industrial wastes, and recycled waste products used by customers as raw material to produce chemical and metallurgy products. In addition, Dalian Dongtai treats or disposes of industrial waste through incineration, burial or water treatment, and provides environmental protection services, technology consultation, pollution treatment services, waste management design processing services, waste disposal solutions, waste transportation services, onsite waste management services, and environmental pollution remediation services. For more information, please visit the Company's website (www.chinaciwt.com).
Cautionary Statement Regarding Forward-Looking Information
This release may include "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain such words as "may," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or the negative or other variations thereof or comparable terminology. These forward-looking statements are based on current expectations and projections about future events. Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, our actual performance may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission: the timing and magnitude of technological advances; the prospects for future acquisitions; the effects of political, economic and social uncertainties regarding the governmental, economic and political circumstances in the People's Republic of China, the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel; our projected sales, profitability, and cash flows; our growth strategies; anticipated trends in our industries; our future financing plans; and our anticipated needs for working capital. Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(UNAUDITED)
For the Three Months Ended September 30,
2010 2009
---- ----
Revenues
Service fees $2,722,643 $2,039,001
Sales of
recycled
commodities 1,884,577 1,082,266
Total
revenues 4,607,220 3,121,268
Cost of
revenues
Cost of
service
fees 1,302,926 612,036
Cost of
recycled
commodities 901,099 571,015
Total cost
of revenues 2,204,024 1,183,051
--------- ---------
Gross profit 2,403,196 1,938,217
Operating
expenses
Selling
expenses 181,815 172,054
General and
administrative
expenses 880,308 976,647
-------
Total
operating
expenses 1,062,123 1,148,701
Income from
operations 1,341,073 789,516
Other income
(expense)
Other income 120,574 87,601
Other
expense (189,493) (49,122)
Settlement
expense - -
Total other
income
(expense) (68,919) 38,479
------- ------
Net income
before tax
provision
Tax
provision 224,462 110,472
Net income 1,047,692 717,524
Net income
attributable
to the
noncontrolling
interest 12,870 12,557
Net income
attributable
to the
Company $1,034,822 $704,966
========== ========
Foreign
currency
translation
adjustment 357,498 (133,238)
Comprehensive
income
attributable
to the
Company 1,392,319 571,729
Comprehensive
income
attributable
to the
noncontrolling
interest 12,870 12,557
Comprehensive
income $1,405,190 $584,286
========== ========
Basic and
diluted
weighted
average
shares
outstanding
Basic 15,336,535 15,265,085
========== ==========
Diluted 17,570,241 15,265,085
========== ==========
Basic and
diluted net
earnings
per share
Basic $0.07 $0.05
===== =====
Diluted $0.06 $0.05
===== =====
For the Nine Months Ended
September 30,
2010 2009
---- ----
Revenues
Service fees $8,894,124 $4,879,448
Sales of
recycled
commodities 4,732,517 2,306,765
Total
revenues 13,626,642 7,186,213
Cost of
revenues
Cost of
service
fees 3,559,797 1,452,911
Cost of
recycled
commodities 1,933,075 1,336,227
Total cost
of revenues 5,492,872 2,789,138
--------- ---------
Gross profit 8,133,770 4,397,075
Operating
expenses
Selling
expenses 502,119 394,125
General and
administrative
expenses 2,893,165 2,495,232
---------
Total
operating
expenses 3,395,284 2,889,357
Income from
operations 4,738,486 1,507,718
Other income
(expense)
Other income 208,167 61,846
Other
expense (642,045) (41,039)
Settlement
expense (439,821) -
Total other
income
(expense) (873,699) 20,806
-------- ------
Net income
before tax
provision
Tax
provision 612,404 215,750
Net income 3,252,383 1,312,774
Net income
attributable
to the
noncontrolling
interest 403,515 (20,844)
Net income
attributable
to the
Company $2,848,869 $1,333,618
========== ==========
Foreign
currency
translation
adjustment 542,483 (141,241)
Comprehensive
income
attributable
to the
Company 3,391,352 1,192,377
Comprehensive
income
attributable
to the
noncontrolling
interest 403,515 (20,844)
Comprehensive
income $3,794,866 $1,171,533
========== ==========
Basic and
diluted
weighted
average
shares
outstanding
Basic 15,327,606 15,267,387
========== ==========
Diluted 17,557,116 15,267,387
========== ==========
Basic and
diluted net
earnings
per share
Basic $0.19 $0.09
===== =====
Diluted $0.16 $0.09
===== =====
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED BALANCE SHEETS
September 30, 2010 December 31, 2009
-----------------
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets
Cash and cash
equivalents $4,575,185 $11,419,129
Notes receivable 119,573 335,780
Accounts receivable,
net 4,684,976 2,021,421
Construction
reimbursement
receivable - 846,270
Other receivables 88,241 91,872
Inventories 2,454,894 2,085,029
Advances to
suppliers 2,184,101 800,694
Deferred expense 14,703 14,650
Total current assets 14,121,672 17,614,845
---------- ----------
Long-term equity
investment 149,466 87,900
Property, plant and
equipment, net 31,943,427 32,319,145
Construction in
progress 14,562,102 9,123,927
Land usage right,
net of accumulated
amortization 2,007,118 1,994,394
BOT franchise right 4,185,038 4,102,023
Certificate of
deposit - 293,002
Restricted cash 3,393,503 96,707
Other asset 1,172,509 1,074,531
Deferred tax asset 324,408 377,381
Related party
receivable 239,145 234,401
TOTAL ASSETS $72,098,388 $67,318,256
=========== ===========
LIABILITIES
Current liabilities
Accounts payable $1,488,264 $418,435
Short-term loan 2,989,313 6,739,038
Tax payable 475,296 200,957
Advance from
customers 733,518 544,125
Deferred sales 300,565 958,930
Accrued expenses 43,649 301,531
Construction
projects payable 2,660,852 3,932,297
Other payable 148,280 235,211
Long-term loan-
current portion 2,259,825 2,245,125
Related party
payable 388,611 380,902
-------
Total current
liabilities 11,488,173 15,956,551
----------
Long-term loan 14,446,700 13,755,512
Asset retirement
obligation 650,825 610,445
Government subsidy 6,376,163 2,464,079
---------
TOTAL LIABILITIES 32,961,860 32,786,587
---------- ----------
EQUITY
Stockholders' equity
of the Company
Preferred stock: par
value $.001;
5,000,000
shares authorized;
none issued and
outstanding - -
Common stock: par
value $.001;
95,000,000 shares
authorized;
15,336,535 and
15,274,035 shares
issued and
outstanding as of
September 30, 2010
and December 31,
2009, respectively 15,337 15,274
Additional paid-in
capital 7,602,625 7,162,867
Deferred stock-
based compensation (711,155) (884,139)
Accumulated other
comprehensive
income 2,868,775 2,326,292
Retained earnings 20,339,788 17,490,919
----------
Total stockholders'
equity of the
Company 30,115,369 26,111,213
---------- ----------
Noncontrolling
interest 9,021,159 8,420,456
--------- ---------
TOTAL EQUITY 39,136,528 - 34,531,669
---------- ----------
TOTAL LIABILITIES
AND EQUITY $72,098,388 $67,318,256
=========== ===========
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
September 30,
2010 2009
Cash flows from
operating activities:
Net income attributable
to the Company $2,848,869 $1,333,618
Adjustments to reconcile
net income to net cash
(used in) provided by
operating activities: - -
Noncontrolling interest 403,515 (20,844)
Depreciation 1,557,266 943,487
Amortization 51,270 51,310
Amortization of deferred
stock-based
compensation 172,983 -
Bad debt allowance 113,808 -
Stock and warrant
issued for settlement 439,821 34,660
Stock issued for service - -
Accretion expenses 27,549 27,086
Government subsidy
recognized as income (23,485) (46,944)
Changes in operating
assets and liabilities:
Notes receivable 219,212 (14,637)
Accounts receivable (2,584,834) (815,494)
Construction
reimbursement
receivable 741,683 -
Other receivables 5,354 (212,649)
Inventories (322,098) 76,715
Advance to suppliers (1,344,098) (498,676)
Deferred expense 240 2,196
Other asset (86,057) (238,349)
Deferred tax assets 59,581 -
Accounts payable 1,043,319 5,448
Tax payable 265,678 (36,809)
Advance from customers 175,349 7,714
Accrued expense (259,496) (335,402)
Other payable (129,103) (98,627)
Deferred income (666,251) (46,578)
Net cash (used in)
provided by operating
activities 2,710,075 117,226
Cash flows from
investing activities
Investment in Xiangtan
Dongtai (58,770) (87,823)
Deposit for business
acquisition - (1,463,722)
Purchase of property and
equipment (544,990) (335,573)
Construction in progress (4,583,006) (7,581,652)
Purchase of intangible
assets (12,982) (23,830)
Due from related party - (373,249)
Certificate of deposit 293,850 (1,683,280)
Cash paid to acquire
additional equity
interest in Sino-
Norway 19,100 -
Net cash used in
investing activities (4,886,798) (11,549,129)
Cash flows from
financing activities
Repayment of
construction project
payable (1,328,059) (3,014,586)
Proceeds from short-
term loan 2,938,497 6,835,580
Repayment of short-term
loans (6,758,544) (3,366,560)
Proceeds from long-term
loan 1,616,173 16,100,938
Repayment of long-term
loans (1,240,597) -
Cash released from
escrow account - 750,000
Subsidy received from
government - 1,463,722
Net cash (used in)
provided by financing
activities (4,772,530) 18,769,094
Effect of exchange rate
on cash 105,309 (17,606)
Net increase (decrease)
in cash and cash
equivalents (6,843,944) 7,319,585
Cash and cash
equivalents, beginning
of period 11,419,129 5,709,129
Cash and cash
equivalents, end of
period $4,575,185 $13,028,714
Supplemental cash flow
information: -
Cash paid during the
year for:
Interest $1,019,545 $620,915
Income taxes $485,458 $329,537
CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Adjusted Net Income and
Diluted EPS
GAAP Net
Income $1,034,822 $704,966 $2,848,869 $1,333,618
Settlement
Expense $- $- $439,821 $-
Adjusted
Amount Net
Income $1,034,822 $704,966 $3,288,690 $1,333,618
Weighted
average
number of
shares -
Diluted 17,570,241 15,265,085 17,557,116 15,267,387
Adjusted
Diluted EPS $0.06 $0.05 $0.19 $0.09
Company Contact:
Mr. Darcy Zhang, Director of Investor Relations
Tel: +86-411-8259-5339
Email: darcy.zhang@chinaciwt.com
Website: www.chinaciwt.com
CCG Investor Relations:
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: athan.dounis@ccgir.com
Website: www.ccgirasia.com
SOURCE China Industrial Waste Management, Inc.
