Tri-Tech Holding Inc.

Tri-Tech Holding Q1 2011 Revenue Up 314% to $17.6M; Net Income Up 108% to $1.7M; EPS $0.21

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Source: Tri-Tech Holding Inc.

Conference Call May 16, 2011 at 9:00 AMEDT

BEIJING, May 13, 2011 /PR Newswire/ -- Tri-Tech Holding Inc. (Nasdaq: TRIT), a premier Chinese company that provides leading turn-key solutions in China for the water resources, water and wastewater treatment, industrial safety and pollution control markets, announced today that revenue for the first fiscal quarter ended March 31, 2011 increased 314% to $17.6 million from $4.2 million in Q1 2010. Net income for the quarter was $1.7 million or a 108% increase over net income of $0.8 million in Q1 2010. Diluted EPS was $0.21 per diluted share compared to that of $0.15 in Q1 2010.

Additional First Quarter 2011 Highlights

  • Revenue from Water/Wastewater Treatment and Municipal Infrastructure operations increased 404% to $12.9 million
  • Revenue from Water Resource Management Systems and Engineering Services increased 1.5% to $1.6 million
  • Revenue from Industrial Pollution Control and Safety increased 4,860% to $3 million from $0.06 million in Q1 of 2010
  • Gross profit increased 184% to $5 million from $1.8 million in Q1 2010
  • Gross margin decreased to 29% compared to 42% for Q1 2010, reflecting a decline in the proportion of revenue attributable to higher margin software sales
  • Income from operations increased 213% to $2.6 million from $0.8 million in Q1 2010
  • Weighted average number of diluted shares outstanding was 8,155,222 for the quarter ended March 31, 2011, compared to 5,559,260 for the quarter ended March 31, 2010, due to completion of secondary offering, additional issuance of ordinary shares from the acquisition, warrants and stock options exercised.

Key First Quarter 2011 Events

  • Awarded a $2.17 million contract with Shaanxi Yanchang Petroleum to construct the Yan'an Emergency Command and Control Center
  • Awarded water monitoring and forecasting contracts collectively valued at $1.26 million in Inner Mongolia, Hunan, Sichuan and Beijing
  • Completed handover of multiple projects for municipal wastewater, solid waste treatment, tail gas control, and flood monitoring and control
  • Presented at four conferences in the U.S. to maintain and foster open communications with investors

First Quarter 2011 Financial Performance

Revenue

Revenue was $17.6 million in the quarter ended March 31, 2011, an increase of $13.3 million, or 314%, compared to revenue of $4.2 million in the same period of 2010. This substantial increase was primarily attributable to sizable revenue recognition of implementation of ongoing major projects, particularly the Ordos water plant construction project, recording an increase of $12.3 million for 25% completion in Q1 2011, in total, the Ordos project has been reached 45% completion by the end of Q1 2011. Revenue from Water/Wastewater Treatment and Municipal Infrastructure continued to be very strong, constituting 74% of total revenue, or $12.9 million, an increase of $10.3 million or 404%, compared to $2.6 million in Q1 2010. Revenue from Water Resources Management Systems and Engineering Services saw a slight 1.5% increase to $1.64 million from $1.62 million in Q1 2010, representing 9% of total revenue. Revenue from Industrial Pollution Control and Safety was $3 million, an increase of 4,860% from the same period in 2010, representing 17% of the total revenue for Q12011.

Net Income

Net income attributable to shareholders of the Company was $1.7 million, an increase of $0.9 million, or 108%, from $0.8 million in the same period of 2010.

EPS

Diluted EPS was $0.21, based on net income of $1.7 million and weighted average number of diluted shares outstanding of 8,155,222 for the quarter ended March 31, 2011, compared to $0.15 in the first quarter of 2010, based on net income of $0.8 million and weighted average number of diluted shares outstanding of 5,559,260.

Gross Profit

Gross profit increased 184% to $5.0 million for the quarter, compared to $1.8 million in Q1 2010. This increase reflected stable revenue growth in sales of system integration and hardware products.

Gross Margin

Gross margin for the quarter decreased to 29% compared to 42% for the same quarter in 2010. The major reason is that most of the revenue for Q1 2011 was generated by the Ordos project, which, given the scale of the project, has a relatively low gross margin. On the other hand, in Q1 2010, the Xinle project, which had fewer competitive bids, had a high gross margin. In addition, the Company has been conservative on its estimates of Ordos project costs. Higher accrued project costs also contributed to the lower gross margin. Normally, the larger the project, the lower the gross margin will be for the project.

Operating Income

Operating income increased 213% to $2.6 million from $0.8 million in Q1 2010. Operating margin was 14.8%, compared to 19.5% in Q1 2010. Operating expenses for the quarter were $2.4 million, an increase of $1.5 million, or 158%, compared to operating expenses of $0.9 million in the same period of 2010. The increase in operating expenses mainly reflected a 179% increase in general and administrative expenses, which grew from $0.7 million to $2.1 million in Q1 2011.

Liquidity and Capital Resources

As of March 31, 2011, cash and cash equivalents were $22.8 million, including U.S. dollar deposits of $7.9 million and RMB deposits of $14.9 million. As of March 31, 2011, working capital was $28.2 million.

Order Backlog and Pipeline

As of March 31, 2011, the Company had a total order backlog of $48.3 million, expected to be collected by the end of 2011. This included $40.4 million in Municipal Water and Wastewater Services, $1.0 million in Water Resource Services and $6.9 million in Industrial Sector Services.

The Company is currently tracking potential projects with a total expected value of $100.6 million, of which approximately $63 million is Wastewater Treatment and Municipal Infrastructure, $26.2 million is Water Resource Management and Engineering Services Segment and $11.4 million is Industrial Pollution Control and Safety.  The Company has not been awarded any of these projects, and there are no guarantees that it will be selected for any of such projects.  

Year 2011 Guidance Reaffirmation

The Company reaffirms the previously announced guidance for the year 2011.  Revenue will reach the range of $69 million to $80 million. Net income will likely be between $11.0 million and $12.8 million. These are the Company's targets, not predictions of actual performance. The foregoing statements regarding targets are forward-looking and actual results may differ materially.

Management Comment

Chief Executive Officer Warren Zhao said, 'Tri-Tech's solid first quarter results reflected expected growth in our three lines of businesses, Water/Wastewater Treatment and Municipal Infrastructure, Water Resource Management and Engineering Services and Industrial Pollution Control and Safety. These results provide us with an excellent start to 2011 and bode well for our future. We believe Tri-Tech will continue to maintain rapid growth by providing reliable and workable solutions to complex environmental challenges faced by China's national and local governments and enterprises and addressed in the 12th Five-Year Plan. Our businesses are poised to directly benefit from the increased investment in water and environmental protection infrastructure as China focuses on the sustainability of its economic growth.

Water/Wastewater Treatment and Municipal Infrastructure

'Municipal wastewater treatment infrastructure will be a key Chinese investment priority in the next five years. Increasing demands for water reuse and technology improvement in large cities are driving demand for advanced wastewater treatment technologies. Currently, a majority of towns and villages in China still have no access to any wastewater treatment infrastructure and regional disparity of wastewater treatment infrastructure development is quite evident. Treatment capacity of some existing wastewater treatment plants is no greater than 30% due to the use of outdated technologies. New requirements and standards for environment management and pollution control will create more technology-oriented business and new markets, driving business opportunities for municipal and industrial wastewater treatment plant upgrades and retrofits.

'We are expanding our geographical reach to all of China including Hubei, Shaanxi, Sichuan and Heilongjiang Provinces and the Inner Mongolia and Xinjiang Autonomous Regions. Our recent expansion has taken us to Anhui, Shanxi and Shandong Provinces.

'As the deadline for full compliance of new drinking water quality standards approaches, we are more involved in the application of advanced technologies such as membrane technology, disinfection and online monitoring to upgrade, retrofit or replace existing treatment facilities to meet enhanced government requirements.

'We are expanding our capabilities from sub-contracting to prime contracting services and have grown from a provider of system integration and hardware to a company capable of engineering, procurement and construction of municipal water, wastewater and solid waste disposal facilities. As the Ordos project progresses, we are gaining experience in the build-and-transfer ('BT') project process. At the same time, we are positioning ourselves to explore possibilities of using the BT business model to help cities with new strategic and financing paradigms and to implement value-added solutions for government agencies. We also intend to focus on larger projects and higher quality projects.

Industrial Pollution Control and Safety

'We are strengthening our industrial pollution services for the oil and petrochemical industry. During the quarter, we established a new business unit in BSST to focus on industrial water and wastewater treatment in the oil and petrochemical industry.

Water Resource Management and Engineering Services

'The Ministry of Finance has budgeted RMB 128 billion for water conservancy projects in 2011 and over RMB 200 billion will be spent when including local projects.

'We are gradually transforming from a partial solution provider to a comprehensive total solution provider for larger scale river basin projects. The Chinese government's decision to initiate new programs and allocate significant investment for their implementation offers us significant business opportunities. Our goal is to ensure that it keeps pace with the development and automation in the water sector.

Research and development

'We currently have three major on-going R&D projects involving software product development and product research. These development phase projects are expected to be completed in the second half of 2011.

'We held a ground-breaking ceremony on April 29, 2011 for our new Tianjin Baoding Environment Technology Development Center, which focuses on technology development, software development, pilot testing, pre-installation/pre-assembly and manufacturing of our proprietary products. The first two phases of the R&D center are to be completed in 2014 with a total capital budget of $18 million.

'We are also seeking cooperative opportunities with several industrial companies in the U.S. and Europe.

'Our plans include constructing and operating one or more forward osmosis pilot units using technology licensed from Hydration Technology Innovations, LLC ('HTI') in 2010. Tri-Tech is authorized and licensed to construct and operate pilot units in both municipal and industrial sites for wastewater treatment testing, demonstration and evaluation. The HTI personal hydration products are at the development stage and are undergoing design changes for localization.

Potential Acquisitions

'Finally, we are actively seeking acquisitions that will further strengthen our water treatment business lines,' Mr. Zhao said.

Conference Call

Tri-Tech CEO Warren Zhao, President Phil Fan, Co-President Gavin Cheng and CFO Peter Dong will host a conference call at 9:00 AM EDT, May 16, 2011 (9:00 PM Beijing/Hong Kong Time on May 16, 2011) to review the Company's financial results and respond to questions and comments.

To participate, call U.S. Toll Free Number +1 (877) 941-1429 approximately 10 minutes before the call. International callers, please dial +1 (480) 629-9857. The conference ID number is 4440532. A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=0000865D. Both an MP3 file one hour after the call and a transcript 48 hours after the call will be available. These will be archived for 90 days and accessible via http://www.tri-tech.cn and http://www.hawkassociates.com.

About Tri-Tech Holding Inc.

Tri-Tech designs customized sewage treatment and odor control systems for China's municipalities and its larger cities. These systems combine software, information management systems, resource planning and local and distant networking hardware that includes sensors, control systems, programmable logic controllers, supervisory control and data acquisition systems. The company also designs systems that track natural waterway levels for drought control, monitor groundwater quality and assist the government in managing its water resources. The company is also moving into the industrial pollution control market. Tri-Tech owns 23 software copyrights and two technological patents and employs 260 people. Please visit http://www.Tri-Tech.cn for more information.

An online investor kit including a company profile, press releases, current price quotes, stock charts and other valuable information for investors is available at http://www.hawkassociates.com/profile/trit.cfm. To subscribe to future releases via e-mail alert, visit http://www.hawkassociates.com/about/alert/.

This press release contains forward-looking statements. These statements are made under the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. Among other things, expectations about expansion into adjacent industry verticals, growth of our Industrial Pollution Control Services, and the potential development of the company's other existing service lines contain forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Contact:

Hawk Associates

Frank Hawkins

+1-305-451-1888

tritech@hawkassociates.com



Financial Tables Follow

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




March 31,

2011

(Unaudited)



December 31,

2010


ASSETS








Current Assets








Cash


$

22,846,768



$

23,394,995

Restricted cash



2,321,142




1,505,617

          Notes and Accounts Receivable, net of allowance for
            doubtful accounts of$565,693 and $427,020 as of
            March 31, 2011 and December 31, 2010, respectively



15,275,129




18,041,079

Unbilled revenue



3,037,062




3,208,473

Other receivables



1,601,803




1,427,050

Inventories



6,019,433




5,886,619

Deposits on projects



576,218




591,505

Prepayments to suppliers and subcontractors



3,218,283




1,311,844

Total current assets  



54,895,838




55,367,182

Long-term unbilled revenue



28,264,389




15,936,739

Plant and equipment, net



1,128,570




1,045,150

Intangible assets, net



9,749,091




4,331,261

Long-term restricted cash



-




203,418

Long-term prepayment on land use right purchasing



-




5,284,854

Goodwill



594,099




594,099

Total Assets


$

94,631,987



$

82,762,703

LIABILITIES AND EQUITY








Current liabilities








Accounts payable and costs accrual on projects


$

20,653,929



$

11,920,063

Customer deposits



2,211,123




1,650,174

Other payables



1,673,474




2,717,502

Accrued liabilities



162,157




294,809

Income taxes payable



2,012,096




1,656,800

Current portion of long-term liabilities



3,786




14,994

Total current liabilities  



26,716,565




18,254,342

Noncurrent deferred income taxes



181,728




187,295

            Total Liabilities



26,898,293




18,441,637

Equity








Tri-Tech Holding Inc. shareholders' equity








Ordinary shares ($0.001 par value, 30,000,000 shares
            authorized; 8,145,533 and8,051,833 shares issued
            as of March 31, 2011 and December 31, 2010,
            respectively)



8,146




8,052

Additional paid-in-capital



47,997,554




47,278,042

Statutory reserves



897,382




897,382

Retained earnings



14,262,605




12,563,624

Treasury stock (21,100 shares in treasury as of March 31, 2011 and
            December 31, 2010, respectively)



(193,750)




(193,750)

Accumulated other comprehensive income



2,279,606




1,739,799

Total Tri-Tech Holding Inc. shareholders' equity



65,251,543




62,293,149

Noncontrolling Interests



2,482,151




2,027,917

Total shareholders' equity  



67,733,694




64,321,066

Total liabilities and equity


$

94,631,987



$

82,762,703



TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



For The Three Months Ended March 31,



2011



2010



(Unaudited)



(Unaudited)


Revenues:



         System integration

$

15,870,494



$

3,508,085


         Hardware products


1,682,717




347,081


         Software products


-




382,948


Total revenues


17,553,211




4,238,114


Cost of revenues








         System integration


11,650,749




2,151,215


         Hardware products


892,282




309,740


         Cost of software


-




10,283


Total cost of revenues


12,543,031




2,471,238


Operating expenses:








   Selling and marketing expenses


314,173




138,140


   General and administrative expenses


2,066,794




741,576


   Research and development expenses


39,985




59,428


Total operating expenses


2,420,952




939,144


Income from operations


2,589,228




827,732


Other income (expenses):








         Other expense


(18,229)




(4,850)


         Interest income


14,162




9,694


         Interest expense


-




(1,629)


         Tax rebates


-




56,965


 Total other (expenses) income, net


(4,067)




60,180


Income before provision for income taxes and noncontrolling interests income


2,585,161




887,912


Provision for income taxes


405,636




67,773


Net income before allocation to Non-controlling Interests


2,179,525




820,139


Less: Net income attributable to Non-controlling Interests


480,544




2,525


Net income attributable to Tri-Tech Holding Inc shareholders

$

1,698,981



$

817,614


Comprehensive income








Foreign currency translation adjustment


513,497




(2,724)


Comprehensive income


2,693,022




817,415


Less: Comprehensive income attributable to non-controlling interests


454,234




2,331


Comprehensive income attributable to Tri-Tech Holding Inc.

$

2,238,788



$

815,084


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








      Basic

$

0.21



$

0.16


      Diluted

$

0.21



$

0.15


Weighted Average number of Ordinary Shares outstanding:








      Basic


8,055,720




5,269,011


      Diluted


8,155,222




5,559,260





TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




For The Three Months Ended March 31,




2011

(Unaudited)



2010

(Unaudited)


Cash flows from operating activities:





Net income before allocation to non-controlling interests


$

2,179,525



$

820,139


Adjustments to reconcile net income before non-controlling interests to net cash used in operating activities:









Amortization of option stock-based compensation



87,131




91,480


Amortization of warrants stock-based compensation



-




8,766


Depreciation and amortization



187,395




40,442


Provision for doubtful accounts



133,808




5,940


Deferred income taxes



5,567




(149,838)


Changes in operating assets and liabilities:









    Restricted cash



(592,554)




1,501,414


    Notes and accounts receivable



2,802,576




764,660


    Unbilled revenue



(12,074,559)




(2,517,140)


    Other receivables and deposits on projects



(162,855)




(479,436)


    Inventories



(72,988)




(359,426)


    Billings in excess of revenue



-




(8,652)


    Prepayments to suppliers and subcontractors



(1,692,754)




(1,164,248)


    Accounts payable and cost accrual on projects



8,738,957




488,386


    Customer deposits



541,104




134,600


    Other payables



(1,096,557)




175,051


    Accrued liabilities



(113,534)




(30,782)


    Income taxes payable



341,123




94,825


Net cash used in operating activities



(788,615)




(583,819)


Cash flows from investing activities:









Payment to purchase plant and equipment



(25,664)




(80,766)


Payment to purchase intangible assets



(162,156)




(292,959)


Addition of Construction in progress



(108,178)




-


Net cash used in investing activities



(295,998)




(373,725)


Cash flows from financing activities:









Proceeds from exercising options into ordinary shares



454,009




-


Proceeds from exercising warrants into ordinary shares



-




1,085,400


Payment of installment of purchasing vehicle



(11,313)




(10,909)


Net cashprovided by financing activities



442,696




1,074,491


Effect of exchange rate fluctuation on cash and cash equivalents



93,690




(86,175)


Net (decrease) increasein cash and cash equivalents



(548,227)




30,772


Cash and cash equivalents, beginning of period



23,394,995




7,171,464


Cash and cash equivalents, end of period


$

22,846,768



$

7,202,236



Supplemental disclosure of cash flow information:


Income taxes paid


$

75,646



$

122,786


Interest paid on debt


$

-



$

1,629



Non-cash investing and financing activities









Non-cash received from exercising of options by offsetting payroll payable


$

178,466



$

-




SOURCE Tri-Tech Holding Inc.

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