News List

      Tri-Tech Holding Reports Third Quarter 2013 Financial Results

      Date:11/21/2013

      BEIJING, November 19, 2013 /PRNewswire-Asia-CMV/ -- 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 third quarter ended September 30, 2013.

      Tri-Tech CEO Phil Fan and CFO & COO Peter Dong will host a conference call at 9:00AM EST, November 20, 2013, (10:00PM Beijing/Hong Kong Time on November 20, 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- 2068 approximately 10 minutes before the call. International callers, please dial 1 (480) 629 - 9712. The conference ID number is 4652009. A live and archived webcast of the call will be available at http://public.viavid.com/index.php?id=106873

      In discussing third quarter results, Mr. Phil Fan, CEO of Tri-Tech Holding Inc., commented, “In an attempt to control costs, we implemented an8% reduction in headcount to control costs. Despite a decline in  revenues, our rigorous selection of projects improved our gross margin and payment collectability. With payments received from the Ordos projects, as well as the divestiture of the Baodi land, we paid off our corporate bond as well as a few other financial obligations to improve our debt ratios and cash positions. While noting some promising signs of improvement, we projected a potential loss from our project in Yelaman Township, Buerjin County, Xinjiang Uygur Autonomous Region. We recognized approximately $1.6 million  as  bad debt. Although currently delayed, our Indian projects, which originally were to be completed in November 2013, received an approval for extension from the client. The extension extended the completion of the projects to 2015.

       Highlights from our third quarter 2013 performance include the following:

      ·    Cash and cash equivalents were approximately $12 million, an improvement of approximately $3.9 million when compared to the beginning of the period.

      ·    Operating activities generated approximately $1.9 million.

      ·    We achieved $9.1 million in revenues, a decline of 49.8% compared to $18.1 million from the same period in 2012.

      ·    Our cost of revenues was $6.8 million, a decline of 49.9% compared to $13.5 million from the same period in 2012.

      ·    Our loss from operations was $2.6 million, compared to a loss from operations of $0.28 million in the same period of 2012.

      ·    Our net loss was $1.2 million, compared to a net loss of $0.68 million in the same period of 2012.

      ·    Our Weighted average number of diluted shares outstanding was 8,215,536 compared to 8,407,085 the same period in 2012.

      ·    Our diluted loss per share was $0.15 compared to diluted loss per share of $0.08 in the same period of 2012.

      2013 Q3 Financial Performance Metrics

      Revenue

      Our total revenues declined by 49.8%, compared to that from the same period last year. This decrease is primarily attributable to the Ordos and India projects. Revenue from the Ordos project decreased from $1,847,272 for the three months period ended September 30, 2012 to $0 in the same period 2013 because the project was substantially completed. The India projects didn’t recognize revenue in the third quarter of 2013, mainly because of the client received India government permissions late, redesigns per the client’s request and the recent rainy season. In the same period of 2012, the India projects recognized revenue of $4.1 million. We expect there will be project progress in the fourth quarter of 2013 or next year. In order to reduce cash flow pressures, we evaluated the projects we planned to bid on and elected not to bid on domestic build and transfer projects, which typically require significant investment and feature slower client payment periods.

      For the nine months ended September 30, 2013, total revenues declined by 40.6%, compared to that from the same period last year. The nine-month decrease was mainly due to the our shift away from build and transfer projects and the progress in Ordos project and the India projects.

      Gross Margin

      Our gross margin increased from 25.7% in the third quarter of 2012 to 25.8% in the third quarter of 2013. The slight increase was attributed to our selection of projects and the improvement of project implementation.

      Our gross margin decreased from 26.0% for the nine months ended of 2012 to 23.2% in the same period 2013. The decrease resulted from increases in material and equipment costs, labor subcontracting costs and shifting from build and transfer projects.

      Selling and Marketing Expenses

      Selling and marketing expenses consist primarily of compensation, marketing, travel and business entertainment expenses. In the third quarter of 2013, total selling and marketing expenses decreased by 40.7%, from $1,031,607 in the third quarter of 2012 to $611,776 in the same period of 2013. Compensation-related expenses decreased by 34.2% from $552,203 in the third quarter of 2012 to $363,134 in the same period of 2013 due to the downsizing. Our decreased headcount in sales also attributed to the decrease of traveling expenses, entertainment expenses and other expenses.

      For the nine months ended September 30, 2013, total selling and marketing expenses decreased by 10.7%, from $2,806,453 in the first nine months of 2012 to $2,506,853 in the same period of 2013, mainly because of the downsizing and budget control. Compensation-related expenses increased by 6.0% from $1,260,994 for the nine months ended September 30, 2012 to $1,336,356 in the same period of 2013.  This increase was primarily attributable to the compensation expense for laying off selling and marketing employees. As to such employees, we expect such expenses are a one - time expense.

      Selling and marketing expenses for the three months ended and nine months ended September 30, 2013 constituted approximately 6.7% and 7.0% of total revenues, respectively.

      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 increased by 4.7% from $3,908,026 in the third quarter of 2012 to $4,093,434 in the third quarter of 2013. Officers’ salary expenses, salaries for mid-level management and other office staff, rental expenses and insurance expenses declined because of the downsizing and budget control. Other general and administrative expenses increased by 43.2% from the amount in the third quarter of 2012 to the amount in the third quarter of 2013, including office expenses, utilities, travel, communication, other services support and bad debt expenses. We had a $96,808 non-cash option expense as a part of other general and administrative expense in the third quarter 2013 and $421,376 in the same period of 2012. A bad debt $1,589,516 was recognized from Buerjin in the third quarter of 2013. We projected a potential loss from our project in Yelaman Township, Buerjin County, Xinjiang Uygur Autonomous Region due to a dispute over quality controls as the quality of materials purchased from one of the suppliers became questionable. Since the client, the supplier and we couldn’t agree on the resolution of the issue, we determined that the potential risk exceeded our projection, and terminated the execution of the contract. Meanwhile, we started to seek solutions to protect and to defend our interests. Out of prudence, the Company recognized, in its worst case scenario, approximately $1.6 million as bad debt under General and Administrative Expenses. The Buerjin bad debt resulted in the final increase of the total general and administrative expenses.

      General and administrative expenses decreased by 3.7% from $10,008,932 for the nine months ended September 30, 2012 to $9,635,485 in the same period of 2013. The officers’ salaries expenses, salaries for mid-level management and other office staff, rental expenses and insurance expenses declined because of the downsizing and budget control. Other general and administrative expenses increased by 4.9% from the amount for the nine months ended September 30, 2012 to the amount in the same period of 2013, including mainly office expenses, utilities, travel, communication, other services support and bad debt expenses. We had a $331,966 non-cash option expense as a part of other general and administrative expense for the nine months ended September 30, 2013 and $951,964 in the same period of 2012.

      General and administrative expenses for the three months and nine months ended September 30, 2013 constituted approximately 45.0% and 26.9% of total revenues, respectively.

      General and administrative expenses for the three months and nine months ended September 30, 2012 constituted approximately 21.5% and 16.6% of total revenues, respectively.

      Loss before Income Taxes

      In the third quarter ended September 30, 2013, our net loss before provision for income taxes was $1,379,395, an increase of 59.4% compared to that of $865,198 in the same period of 2012. In the third quarter ended September 30, 2013, net loss attributable to the our shareholders was $1,230,576, an increase of 81.8%, from a net loss of $677,022 for the same period in 2012, mainly due to the significant decline of revenues.

      For the nine months ended September 30, 2013, our net loss before provision for income taxes was $3,287,682, a decrease of 232.7% from net income of $2,476,774 in the same period in 2012. For the nine months ended September 30, 2013, net loss attributable to the our shareholders was $2,931,369, a decrease of 237.5% from net income of $2,131,990 for the same period in 2012, mainly due to the significant decline of revenue.

      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 September 30, 2013, our cash and cash equivalents amounted to $11,960,663. The restricted cash as of September 30, 2013 and December 31, 2012 amounted to $7,742,693 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 provided by operating activities was $1,853,162 for the nine months ended September 30, 2013, compared with net cash used in operating activities of $17,011,378 in the same period in 2012. The increase of $18,864,540 in operating cash inflow was due to the receipt of $25.2 million from the Ordos project and prepayments on projects.

      Investing Activities

      Net cash provided by investing activities was $8,402,033 during the nine months ended September 30, 2013, an increase of $9,420,390 from net cash used in investing activities of $1,018,357 in the same period of 2012. The increase was attributed to the proceeds from the pending asset sale of Baoding in the amount of $8,926,705.

      Financing Activities

      The cash used in financing activities was $5,970,435 for the nine months ended September 30, 2013, compared to cash provided by financing activities of $18,160,085 in the same period of 2012. The decrease was due to the payment of bank borrowings, loans from third-party companies and noncontrolling shareholders. We have repaid the corporate bond with the funds received from the buyer of the land and property in Baoding .

      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 September 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 September 30, 2013 and December 31, 2012 were $14,107,030 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 September 30, 2013, our working capital was $29,612,633, with current assets totaling $107,022,653 and current liabilities totaling $77,410,020.

      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 new projects and to improve the implementation of the current projects. 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 may look into the possibility of optimizing our funding structure by obtaining short- and/or long-term debt through commercial loans. We are actively exploring opportunities with other major Chinese banks, and we expect to obtain additional lines of credit to pursue favorable project opportunities in the future. Other financing instruments into which we are currently looking include supply chain financing, project financing, trust fund financing and capital leasing.

       

      We may focus on improving our collection of accounts receivable. Most of our clients are central, provincial and local governments. We believe that our clients are in good financial conditions. Therefore, we expect good collectability from relatively high quality accounts receivables. The accounts receivable collection should catch up with our rapid growth in the near future. Given the high contractual interest rate on unpaid amounts for long-term projects, we expect that some clients may choose to pay before such interest starts to accrue.

       

      We avoided build and transfer projects, which tend to constrain our cash.

       

       

       

      We are in the process of selling our real property in Baoding, along with all construction including the costs of construction and operation expended since acquisition for approximately $18.7 million. We acquired this property on November 26, 2010. The sale is expected to close before the end of 2013. We previously received approximately $8.9 million from the buyer which was used to satisfy our corporate bond obligations.

      Order Backlog and Pipeline

      Our  backlog represents the amount of contract work remaining to be completed -- 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. We evaluate the ongoing projects regularly and updates the schedules as appropriate.

      The following table provides backlog by segments for as of September 30, 2013 and December 31, 2012, respectively.

       

       

      September 30, 2013

       

       

      December 31, 2012

       

       

       

       

       

       

      USD Million

       

       

      % of Total
      Backlog

       

       

      USD Million

       

       

      % of Total
      Backlog

       

       

      % Change

       

      Segment 1:

       

       

      34.2

       

       

       

      65.8

      %

       

       

      38.7

       

       

       

      64.4

      %

       

       

      (11.7

      )%

      Segment 2:

       

       

      6.1

       

       

       

      11.7

      %

       

       

      6.7

       

       

       

      11.1

      %

       

       

      (9.4

      )%

      Segment 3:

       

       

      11.7

       

       

       

      22.5

      %

       

       

      14.7

       

       

       

      24.5

      %

       

       

      (20.5

      )%

      Total

       

       

      52.0

       

       

       

      100.0

      %

       

       

      60.1

       

       

       

      100.0

      %

       

       

      (13.6

      )%

      Pipeline represents the values of projects we have been actively pursuing. The pipeline as of September 30, 2013 and December 31, 2012 was as below:

       

       

      September 30, 2013

       

       

      December 31, 2012

       

       

       

       

       

       

      USD Million

       

       

      % of Total
      Pipeline

       

       

      USD Million

       

       

      % of Total
      Pipeline

       

       

      % Change

       

      Segment 1:

       

       

      17.3

       

       

       

      51.0

      %

       

       

      50.7

       

       

       

      57.6

      %

       

       

      (65.9

      )%

      Segment 2:

       

       

      2.3

       

       

       

      6.8

      %

       

       

      2.5

       

       

       

      2.8

      %

       

       

      (7.2

      )%

      Segment 3:

       

       

      14.3

       

       

       

      42.1

      %

       

       

      34.8

       

       

       

      39.5

      %

       

       

      (59.0

      )%

      Total

       

       

      33.9

       

       

       

      100.0

      %

       

       

      88.0

       

       

       

      100.0

      %

       

       

      (61.5

      )%


      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 13.6% from December 31, 2012 to September 30, 2013, because of the projects’ progress in the third quarter of 2013. Being more rigorous in project selection, we narrowed down the number of candidate projects, so the pipeline declined significantly.

      -FINANCIAL TABLES –

      TRI-TECH HOLDING INC. AND SUBSIDIARIES

      CONSOLIDATED BALANCE SHEETS

       

       

      September 30,
      2013

       

       

      December 31,

       

       

       

      (Unaudited)

       

       

      2012

       

      ASSETS

       

       

       

       

       

       

       

       

      Current assets

       

       

       

       

       

       

       

       

      Cash*

       

      $

      11,960,663

       

       

      $

      8,098,657

       

      Restricted cash*

       

       

      5,087,685

       

       

       

      4,352,443

       

      Accounts and notes receivable, net of allowance for doubtful accounts of $3,683,789 and $1,475,771 as of September 30, 2013 and December 31 2012, respectively*

       

       

      26,675,635

       

       

       

      18,598,110

       

      Unbilled revenue*

       

       

      17,721,365

       

       

       

      27,954,525

       

      Other current assets*

       

       

      4,596,575

       

       

       

      3,825,770

       

      Inventories*

       

       

      11,797,155

       

       

       

      8,459,073

       

      Deposits on projects*

       

       

      1,248,814

       

       

       

      1,469,550

       

      Prepayments to suppliers and subcontractors*

       

       

      14,834,471

       

       

       

      8,376,944

       

      Assets held for sale

       

       

      13,100,290

       

       

       

      11,828,493

       

      Total current assets

       

       

      107,022,653

       

       

       

      92,963,565

       

      Long-term unbilled revenue*

       

       

      40,806,309

       

       

       

      51,219,694

       

      Long-term accounts receivable

       

       

      777,836

       

       

       

      413,770

       

      Plant and equipment, net*

       

       

      1,543,939

       

       

       

      1,764,784

       

      Construction in progress

       

       

      125,794

       

       

       

      2,560

       

      Intangible assets, net*

       

       

      4,989,240

       

       

       

      5,407,891

       

      Long-term restricted cash

       

       

      2,655,008

       

       

       

      3,464,524

       

      Goodwill

       

       

      1,441,278

       

       

       

      1,441,278

       

      Total Assets

       

      $

      159,362,057

       

       

      $

      156,678,066

       

       

       

       

       

       

       

       

       

       

      LIABILITIES AND EQUITY

       

       

       

       

       

       

       

       

      Current liabilities

       

       

       

       

       

       

       

       

      Accounts payable

       

      $

      6,653,877

       

       

      $

      5,890,511

       

      Costs accrual on projects*

       

       

      21,651,738

       

       

       

      23,637,751

       

      Advance from customers*

       

       

      2,375,589

       

       

       

      1,157,247

       

      Advance from buyer of assets held for sale

       

       

      9,033,350

       

       

       

      -

       

      Loans from third party companies and individuals*

       

       

      8,795,489

       

       

       

      6,400,659

       

      Amount due to noncontrolling interest investor

       

       

      5,623,017

       

       

       

      9,047,068

       

      Amount due to related party

       

       

      1,847,263

       

       

       

      1,656,420

       

      Other payables*

       

       

      504,074

       

       

       

      461,258

       

      Taxes payable*

       

       

      6,151,286

       

       

       

      5,577,533

       

      Accrued liabilities*

       

       

      580,893

       

       

       

      485,354

       

      Payable on investment consideration

       

       

      280,559

       

       

       

      582,966

       

      Deferred income taxes*

       

       

      1,551,844

       

       

       

      1,782,786

       

      Deferred revenue

       

       

      -

       

       

       

      289,485

       

      Short-term bank borrowing (including VIE short-term borrowing of the consolidated VIEs without recourse to Tri-Tech Holdings of $7,478,149 and $2,754,158 as of September 30, 2013 and December 31, 2012, respectively)*

       

       

      12,361,041

       

       

       

      8,150,041

       

      Total current liabilities

       

       

      77,410,020

       

       

       

      65,119,079

       

      Noncurrent deferred income taxes

       

       

      4,084,424

       

       

       

      3,699,790

       

      Long-term bank borrowings

       

       

      11,370

       

       

       

      17,976

       

      Corporate Bond

       

       

      -

       

       

       

      7,935,122

       

      Total Liabilities

       

       

      81,505,814

       

       

       

      76,771,967

       

       

       

       

       

       

       

       

       

       

      Equity

       

       

       

       

       

       

       

       

      Tri-Tech Holding Inc. shareholders' equity

       

       

       

       

       

       

       

       

      Ordinary shares ($0.001 par value, 30,000,000 shares authorized; 8,470,874 and 8,259,506 shares issued as of September 30, 2013 and December 31, 2012, respectively; 8,449,774 and 8,238,406 shares outstanding as of September 30, 2013 and December 31, 2012, respectively)

       

       

      8,471

       

       

       

      8,259

       

      Additional paid-in-capital

       

       

      50,753,589

       

       

       

      50,119,428

       

      Statutory reserves

       

       

      2,246,910

       

       

       

      2,246,910

       

      Retained earnings

       

       

      14,107,030

       

       

       

      17,038,396

       

      Treasury shares (21,100 shares in treasury as of September 30, 2013 and December 31, 2012, respectively)

       

       

      (193,750

      )

       

       

      (193,750

      )

      Accumulated other comprehensive income

       

       

      5,812,376

       

       

       

      5,086,827

       

      Total Tri-Tech Holding Inc. shareholders' equity

       

       

      72,734,626

       

       

       

      74,306,070

       

      Noncontrolling interests

       

       

      5,121,617

       

       

       

      5,600,029

       

      Total equity

       

       

      77,856,243

       

       

       

      79,906,099

       

      Total Liabilities and Equity

       

      $

      159,362,057

       

       

      $

      156,678,066

       

      TRI-TECH HOLDING INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

       

       

      For The Three Months Ended
      September 30,

       

       

       

      2013

       

       

      2012

       

       

       

      (Unaudited)

       

       

      (Unaudited)

       

      Revenues:

       

       

       

       

       

       

       

       

      System integration

       

       

      7,516,723

       

       

       

      16,381,899

       

      Hardware products

       

       

      1,585,706

       

       

       

      1,764,912

       

      Total revenues

       

       

      9,102,429

       

       

       

      18,146,811

       

      Cost of revenues

       

       

       

       

       

       

       

       

      System integration

       

       

      5,507,286

       

       

       

      12,110,593

       

      Hardware products

       

       

      1,248,733

       

       

       

      1,371,138

       

      Total cost of revenues

       

       

      6,756,019

       

       

       

      13,481,731

       

      Gross profit

       

       

      2,346,410

       

       

       

      4,665,080

       

      Operating expenses:

       

       

       

       

       

       

       

       

      Selling and marketing expenses

       

       

      611,776

       

       

       

      1,031,607

       

      General and administrative expenses

       

       

      4,093,434

       

       

       

      3,908,026

       

      Research and development expenses