- Third Quarter Sales Rose 44%, Gross Margin 41% - - Teleconference
to Begin Monday, November 10, 2008, at 8:30 a.m. EST - BEIJING,
Nov. 7 /Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc. (OTC
Bulletin Board: CAGC) ("China Agritech" or "the Company"), a
leading national- level liquid and granular organic compound
fertilizer manufacturer and distributor in China, today announced
its net income for the third quarter ended September 30, 2008,
increased 35.3% to $3.5 million from the same period last year.
Earnings per diluted share rose 40% to $0.14 as compared with the
same period last year. Financial Highlights Third Quarter of 2008
vs. the same period of 2007 -- Net sales increased 43.8% to $16.7
million -- First sales of granular fertilizers generated $3.6
million, or 21.5% of net sales -- Net income rose 35.3% to $3.5
million -- Earnings per share rose 40.0% to $0.14 Nine Months of
2008 vs. the same period of 2007 -- Net sales rose 26.6% to $38.1
million -- Net income increased 7.1% to $7.6 million -- Earnings
per share were $0.31, compared with $0.34 last year Operational
Highlights -- Commenced production of granular fertilizers;
contributed 21.5% of net sales -- Mr. Yau-Sing Tang appointed as
Chief Financial Officer in October 2008 -- Three independent
directors appointed to the board in October 2008 "I am pleased to
report a robust quarter on both the top and bottom lines," said Mr.
Yu Chang, Chairman and Chief Executive Officer of China Agritech.
"The demand for liquid organic compound fertilizers remained solid,
and we successfully marketed and sold granular compound fertilizers
for the first time in the third quarter. Our strategy for the rest
of the year and continuing into 2009 is to enhance our
payment-collection efforts and focus on customers with strong
balance sheets, while actively pursuing government production
licenses for the three granular plants that we are building in
various regions of China." Mr. Chang continued, "The Chinese
government's new rural reform which was announced mid-October will
ensure the safety, efficacy and environmental friendliness of crop
production in China. With that in mind, we continue to be bullish
on China's $1.5-billion green food market, which will drive the
growth of organic fertilizers, both liquid and granular. We
reaffirm our guidance for the year 2008." Third Quarter of 2008
Results For the third quarter of 2008, the Company recorded net
sales of $16.7 million, a 43.8% increase from the same period of
last year. Net sales for the first time included revenue from a new
product, granular fertilizer, which accounted for 21.5%. Excluding
granular fertilizer products, sales of liquid fertilizers increased
13.1% from the same period of last year, benefiting from continued
efforts to establish new markets in the central and southern
regions of China. Gross profit rose 9.7% to $6.8 million from the
same period of last year. Gross margin was 40.7%, compared with
53.3% in the same period of last year. The decrease in gross margin
was mainly because of the introduction of granular fertilizers that
we began to produce through a third-party manufacturer in September
2008. Gross margin for the liquid fertilizers was 48.3% in the
third quarter of 2008. Selling expenses rose 31.4% to $1.1 million
from the same period of last year. As a percentage of net sales,
they were 6.5% compared with 7.1% in the same period of last year.
The increase was mainly attributable to additional compensation
paid to sales personnel as well as a rise in transportation costs
reflecting higher sales volume. General and administrative expenses
rose 6.0% to $780,000 from the same period of last year. As a
percentage of net sales, they were 4.7% compared with 6.4% in the
same period of last year. The increase was mainly due to factory
rental expenses related to the Company's new granular fertilizer
plant in Beijing as well as increased compensation related to the
addition of new members to the management team. Operating income
rose 6.4% to $4.9 million from the same period of last year. The
effective tax rate was 24.4%, compared with 36.3% in the same
period of last year. The decrease was due to the change in Chinese
tax laws, which took effect on January 1, 2008. Net income rose
35.3% to $3.5 million from the same period of last year. Earnings
per diluted share were $0.14, compared with $0.10 in the same
period of last year. Nine Months of 2008 Results For the first nine
months of 2008, net sales rose 26.6% to $38.1 million. Gross profit
increased 7.4% to $17.7 million. Gross margin was 46.4%, compared
with 54.7% in the same period of last year. Total operating
expenses increased 43.8% to $5.7 million. Net income grew 7.1% to
$7.6 million. Earnings per diluted share were $0.31, compared with
$0.34 in the same period of last year. The decrease in EPS was
because of the increase in the total number of diluted shares
outstanding, which was 24,699,615 as of September 30, 2008.
Liquidity Conditions As of September 30, 2008, the Company had cash
and cash equivalents of $5.3 million, compared with $7.4 million at
June 30, 2008. Net working capital was $60.9 million, compared with
$56.8 million at June 30, 2008. Days of sales outstanding were 245
days. Total shareholders' equity was $61.7 million, compared with
$58.1 million at June 30, 2008. Operational Highlights In the third
quarter of 2008, the Company commenced the production of granular
fertilizer products via a third-party manufacturer, as it awaits
the government production license for its own Beijing plant. The
Company expects to receive the license by the end of November 2008.
On October 15, 2008, the Company announced that it renewed a sales
and distribution partnership contract with Sinochem Fertilizer Co.,
Ltd. ("Sinochem") for RMB 64.9 million ($9.5 million), through the
end of 2009. Under the terms of the new contract, the Company will
provide 1,200 tons of its premium, highly concentrated liquid
organic compound fertilizer, Green Vitality, to Sinochem upon
purchase orders. The Company will also assist in marketing
initiatives such as print and TV advertisements, promotional
conferences and demos at retail shops. On October 22, 2008, the
Company announced the appointment of three independent directors:
Mr. Gene Michael Bennett, Professor Lunzhang Dai, and Mr. Hailin
Zhang. The Company also announced in conjunction with the
appointments the resignation of Mr. Tao Liang from its board. The
Company's board now comprises five directors, a majority of whom
are independent as defined by the NASDAQ marketplace rules. In
addition, the Company has established a fully independent audit
committee, chaired by Mr. Bennett, as well as fully independent
compensation and nominating and governance committees. On October
23, 2008, the Company announced the appointment of Mr. Yau-Sing
Tang as Chief Financial Officer. With the three new independent
directors of the board, this will entitle China Agritech to receive
$2 million from an escrow account, according to the Escrow
Agreement in connection with the 2007 PIPE transaction. "Our new
CFO and the new members of our board of directors bring us
substantial depth and expertise in accounting, corporate finance
and financial-reporting experience," said Mr. Chang. "We look
forward to drawing upon their expertise, and upon Mr. Tang's
extensive contacts in the financial services industry, to
strengthen our company, bring further value to our stockholders,
and to improve our communication with the investor community."
Business Outlook The Company reaffirms its expectation that revenue
for the 2008 year will be in the range of $54 million to $56
million and net income will be in the range of $8.5 million to $9.0
million. These targets are based on the Company's current views on
the operating and market conditions, which are subject to change.
Conference Call Information The Company will host a conference
call, to be simultaneously Webcast, on Monday, November 10, 2008,
at 8:30 a.m. Eastern Standard Time, or 9:30 p.m. Beijing Time. To
participate, please call + 1 (877) 407-9205 (North America) or + 1
(201) 689-8054 (International). A live Webcast of the conference
call will be available on China Agritech's Website at
http://www.chinaagritechinc.com/ . Please visit the Website at
least 15 minutes early to register for the Webcast and download any
necessary audio software. A replay of the call will be available
through Monday, November 17, 2008, at 11:59 p.m. EST. To access,
dial +1 (877) 660-6853 (North America) or +1 (201) 612-7415
(International). Enter Account Number: 286 and Conference ID
Number: 301974. About China Agritech, Inc. China Agritech, Inc. is
engaged in the development, manufacturing and distribution of
liquid and granular organic compound fertilizers and related
products in China. The Company has developed proprietary formulas
that provide a continuous supply of high-quality agricultural
products while maintaining soil fertility. The Company sells its
products to farmers located in 26 provinces of China. For more
information about the Company, please visit
http://www.chinaagritechinc.com/ . Safe Harbor Statement This
release contains certain "forward-looking statements" relating to
the business of China Agritech and its subsidiary companies, which
can be identified by the use of forward-looking terminology such as
"believes, expects" or similar expressions, including but not
limited to, statements regarding the continued demand for China
Agritech's products, China Agritech's ability to sustain growth for
the balance of the year and China Agritech's ability to generally
meet all of its objectives. Such forward-looking statements involve
known and unknown risks and uncertainties, including all business
uncertainties relating to product development, marketing,
concentration in a single customer, raw material costs, market
acceptance, future capital requirements, and competition in general
and other factors that may cause actual results to be materially
different from those described herein as anticipated, believed,
estimated or expected. Certain of these risks and uncertainties are
or will be described in greater detail in our filings with the SEC.
Except as required by law, China Agritech is under no obligation to
(and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of new
information, future events or otherwise. For more information,
please contact: In China: Mr. Kelviz Lim Investor Relations China
Agritech, Inc. Tel: +86-10-5962-1228 Email: In the U.S.: Valentine
Ding Investor Relations Grayling Global Tel: +1-646-284-9412 Email:
Financial Tables to Follow CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, DECEMBER 31, 2008 2007
(UNAUDITED) (AUDITED) ASSETS Current Assets Cash and cash
equivalents $5,265,474 $11,841,221 Restricted cash 2,000,000
2,011,415 Accounts receivable, net of allowance for doubtful
accounts of $248,881 and $227,981 at September 30, 2008 and
December 31, 2007 respectively 44,930,728 22,695,039 Inventories
9,654,932 3,508,741 Advances to suppliers 4,348,443 12,343,255
Prepayments and other receivables 1,983,648 1,242,692 Total Current
Assets 68,183,225 53,642,364 Property and equipment, net 4,627,915
3,798,958 Construction in progress 877,800 -- Total Assets
$73,688,940 $57,441,322 LIABILITIES AND STOCKHOLDERS'S EQUITY
Current Liabilities Accounts payable $3,297,290 $41,146 Accrued
expenses and other payables 1,571,938 1,047,721 Amount due to
related parties -- 352,505 Taxes payable 2,365,178 1,650,243 Total
Current Liabilities 7,234,406 3,091,614 Minority Interest 4,719,389
3,465,724 Commitments -- -- Stockholders' Equity Common stocks;
$0.001 par value, 100,000,000 shares authorized, 24,699,615 shares
issued and outstanding as of September 30,2008 and December 31,2007
24,700 24,700 Additional paid in capital 26,135,913 26,135,914
Statutory reserve 5,644,918 4,299,653 Accumulated other
comprehensive income 5,851,996 2,578,107 Retained earnings
24,077,618 17,845,610 Total Stockholders' Equity 61,735,145
50,883,984 Total Liabilities and Stockholders' Equity $73,688,940
$57,441,322 CHINA AGRITECH, INC. AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENTS THREE-MONTH PERIODS NINE-MONTH PERIODS ENDED
SEPTEMBER 30, ENDED SEPTEMBER 30, 2008 2007 2008 2007 Net sales
$16,674,095 $11,595,798 $38,083,747 $30,074,430 Cost of sales
(9,896,393) (5,415,761) (20,429,067) (13,631,864) Gross profit
6,777,702 6,180,037 17,654,680 16,442,566 Operating expenses
Selling expenses (1,084,382) (824,695) (3,016,586) (2,229,480)
General and administrative expenses (779,840) (736,424) (2,703,731)
(1,748,581) Total operating expenses (1,864,222) (1,561,118)
(5,720,317) (3,978,061) Income from operations 4,913,480 4,618,919
11,934,364 12,464,505 Other income (expense) 43,452 (50,296)
(28,870) (54,621) Interest income 22,006 3,467 85,902 37,763
Exchange gain (loss) 54,955 (32,680) (47,562) (32,696) Total other
income (expense) 120,413 (79,509) (9,470) (49,554) Income before
income taxes and minority interest 5,033,894 4,539,410 11,943,834
12,414,951 Provision for income taxes (1,225,991) (1,648,340)
(3,375,985) (4,452,532) Income before minority interests 3,807,902
2,891,070 8,567,848 7,962,419 Minority interests (345,579)
(333,392) (990,577) (885,469) Net income 3,462,323 2,557,678
7,577,271 7,076,950 Other comprehensive income Foreign currency
translation adjustment 158,711 522,622 3,273,889 1,354,428
Comprehensive income 3,621,034 3,080,333 10,851,160 8,431,378 Basic
and diluted weighted average shares outstanding 24,699,615
24,397,658 24,699,615 20,914,208 Basic and diluted net earnings per
share 0.14 0.10 0.31 0.34 CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS SEPTEMBER 30, 2008 2007 Cash
flows from operating activities: Net income $7,577,272 $7,076,949
Adjustments to reconcile net income to net cash used in operating
activities: Stock based compensation -- 51,484 Minority interest
990,578 885,469 Depreciation and amortization 470,198 259,542
(Increase) decrease in current assets: Accounts receivable
(22,235,689) (17,070,111) Inventories (6,146,191) (4,033,019)
Advances to suppliers 7,994,813 7,717,799 Prepayments and other
receivable (740,955) (89,244) Due from shareholders -- 22,507
Increase (decrease) in current liabilities: Accounts payable
3,256,144 (157,478) Taxes payable 714,935 1,096,563 Accrued
expenses and other payables 171,714 1,050,860 Net cash used in
operating activities (7,947,183) (3,188,679) Cash flows from
investing activities: Acquisition of property & equipment
(1,299,156) (1,459,705) Construction in progress (877,800) (3,009)
Restricted cash 11,415 -- Net cash used in investing activities
(2,165,541) (1,462,714) Cash flows from financing activities:
Amount held in escrow account -- (2,000,000) Issuance of shares for
cash -- 13,484,478 Net cash provided by financing activities --
11,484,478 Net (decrease) in cash and cash equivalents (10,112,724)
(6,833,085) Effect of exchange rate change on cash and cash
equivalents 3,536,977 428,879 Cash and cash equivalents, beginning
of year 11,841,221 6,430,009 Cash and cash equivalents, end of year
5,265,474 13,691,973 Supplement disclosure of cash flow
information: Income taxes paid 3,362,504 3,595,008 Noncash
Investment and Financing Activity: Offset of amounts due to/from
stockholders 330,032 -- DATASOURCE: China Agritech, Inc. CONTACT:
In China: Mr. Kelviz Lim, Investor Relations, China Agritech, Inc.
at +86-10-5962-1228 or ; In the U.S.: Valentine Ding, Investor
Relations, Grayling Global at +1-646-284-9412 or for China Agritech
Web site: http://www.chinaagritechinc.com/
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