Teleconference to Begin at 8:00 a.m. EDT on Wednesday, April 1,
2009 BEIJING, March 31 /PRNewswire-Asia-FirstCall/ -- China
Agritech, Inc. (OTC:CAGC) (BULLETIN BOARD: CAGC) ("China Agritech"
or the "Company"), a leading national liquid and granular organic
compound fertilizer manufacturer and distributor in China, today
announced its financial results for fourth quarter and full year
ended December 31, 2008. Financial Highlights -- 2008 net sales
were $45.2 million compared with $38.0 million in 2007 -- Gross
margin was 45.0% compared with 50.2% in 2007 -- 2008 net income was
$8.6 million, or diluted EPS of $0.35, compared with $8.5 million,
or diluted EPS of $0.39 in 2007 -- Cash as of December 31, 2008 was
$12.0 million -- Net working capital as of December 31, 2008 was
$61.5 million -- No bank debt as of December 31, 2008 --
Shareholders' equity as of December 31, 2008 was $62.8 million
compared with $50.8 million as of December 31, 2007 "2008 marked a
strategic move in our organic compound fertilizer product," Mr. Yu
Chang, Chairman, President and CEO of China Agritech, said. "As a
market leader in China's liquid organic fertilizer business, we
launched our granular fertilizer products, which broaden what we
offer to help farmers increase crop yields and preserve the
fertility of the soil. In addition, we believe granular organic
fertilizers will help us maintain a market-leading position within
organic fertilizers because they present a much bigger market for
us than liquid fertilizers." Mr. Chang continued, "With the
completion of our 100,000-ton-per-year granular plant in Anhui this
month, I am pleased we are close to fulfilling our strategic
repositioning in the organic fertilizer market. With our national
sales network and our strategic production locations in Northeast,
Eastern and Western China, we can now market our expanded line of
organic fertilizer products in China's big agricultural provinces.
We also believe we are well-positioned to benefit from the recent
increase in the Chinese government's agricultural subsidies and
increased crop reserves to help increase farmers' income. Further,
local governments are supporting the growing use of organic
fertilizers, which surpass chemical fertilizers in safety, efficacy
and environmental friendliness. We believe that these policies
supported by the Chinese government will continue to be favorable
to us as the Chinese government continues to seek ways to increase
farmers' income and encourages the growth of diversified crops,
especially organic food. Lastly, as our new facility in Anhui is
close to commercial launch, we expect granular fertilizers sales to
ramp up in 2009." Fourth Quarter 2008 Results For the fourth
quarter of 2008, the Company recorded net sales of $7.2 million
compared with $7.9 million in the fourth quarter of 2007. Sales are
seasonal, with the fourth quarter historically experiencing weak
demand. Net sales in the 2008 fourth quarter were also affected by
a cumulative accounting reclassification that turned marketing
rebates from selling expenses into sales discounts to net off the
Company's sales. Also, a greater sales discount was offered to
encourage payment during the fourth quarter. Excluding the impact
of the reclassification and higher discount, net sales in the 2008
fourth quarter would have approximated the sales in the same
quarter in 2007. Gross profit was $2.7 million compared with $2.6
million in the fourth quarter of 2007. Gross margin was 37.7%
compared with 33.1% in the fourth quarter of 2007. Selling expenses
were negative $646,822, compared with negative $505,612 in the
fourth quarter of 2007. The negative selling expenses resulted from
the change in the accounting treatment mentioned above. General and
administrative expenses were $1.6 million compared with $670,000 in
the fourth quarter of 2007. The increase was primarily due to one-
time, non-recurring professional fees related to the acquisition of
the 10% interest in Pacific Dragon Fertilizer Limited, higher
administrative fees related to the Company establishing new sales
regions with associated expenses related to new plant construction,
the cost of SOX compliance, provision for doubtful accounts,
technical consultation and testing for new products, and the hiring
of the new CFO and the appointment of three new independent
directors in the fourth quarter of 2008. Operating income was $1.8
million compared with $2.5 million in the fourth quarter of 2007.
The decrease was primarily attributable to the higher general and
administrative expenses. The effective tax rate was 38.0% compared
with 35.8% in the fourth quarter of 2007 due to the relatively
higher profit contribution and tax liability from the Company's
only tax-paying subsidiary and due to a net operating loss in other
tax jurisdictions where no benefit was realized. Net income was
$1.1 million compared with $1.5 million in the fourth quarter of
2007. Diluted EPS was $0.04 compared with $0.06 in the fourth
quarter of 2008. Full Year 2008 Results For the year 2008, net
sales grew 19% to $45.2 million from $38.0 million in 2007. The
sales increase was primarily generated by the planned expansion
into new geographic territories, particularly the southern and
central regions of China, as well as sales of the newly launched
organic granular fertilizers during the 2008 third quarter from an
outsourced supplier. Gross profit was $20.4 million compared with
$19.1 million in 2007. The gross margin was 45.0% compared with
50.2% in 2007. The gross margin decline was primarily due to higher
raw material prices, a change in product mix due to sales of
lower-margin granular fertilizers in the third quarter of 2008.
Total operating expenses were $6.6 million compared with $4.1
million in 2007. Our general and administrative expenses were $4.3
million for the year ended December 31, 2008, as compared to $2.4
million for the year ended December 31, 2007. Our operating and
administrative expenses consist primarily of rental expenses,
salaries, business development, depreciation and travel expenses,
and legal and professional expenses. The increase was primarily
attributable to higher investment in marketing as the Company
penetrated new sales regions and had related new plant
construction, one time non-recurring professional fees related to
the acquisition of the 10% interest in Pacific Dragon Fertilizer
Limited, higher transportation costs as a result of an increase in
fuel prices, the cost of SOX compliance, provision for doubtful
accounts, technical consultation and testing for new products, the
hiring of the new CFO and the appointment of three independent
directors to strengthen corporate governance of the Company.
Operating income in 2008 was $13.7 million compared with $14.9
million in 2007. The decline was due to lower gross profit combined
with the higher operating expenses mentioned above. The effective
tax rate was 29.7% compared with 35.9% in 2007. The improvement was
due to the change in Chinese tax laws resulting in a decrease in
the corporate tax rate from 33% to 25%, which took effect on
January 1, 2008. Net income was $8.6 million in 2008 compared with
$8.5 million in 2007. Diluted EPS was $0.35 compared with $0.39 in
2007, with 12.6% greater number of shares outstanding as of
December 31, 2008 compared with the number of shares outstanding as
of December 31, 2007. As of December 31, 2008, the Company had cash
and cash equivalents of $12.0 million compared with $11.8 million
at the end of 2007. The current ratio was approximately 13.5 to 1
with no long-term liabilities at the 2008 year end. Net working
capital was $61.5 million compared with $50.6 million at the end of
2007. Total shareholders' equity was $62.8 million compared with
$50.9 million in 2007. As of December 31, 2008, the Company had
total diluted shares outstanding of approximately 24.7 million
compared with 21.9 million at the end of 2007 due to the additional
5.6 million shares issued in the 2007 private placement which
raised approximately $15 million. Mr. Chang said, "For 2009, China
Agritech will focus on generating greater positive cash flow and
has initiated new credit evaluation procedures and greater payment
collection efforts. Additionally, we have established shorter
payment terms with our granular customers than our liquid
customers, which can also help to improve our overall accounts
receivable. Management is closely monitoring expenses and has
already initiated a salary-and-hiring freeze to improve profits and
preserve cash. Lastly, we are considering incentive programs based
on increasing shareholder value to reward performance, and to align
management's and shareholders' interests." Operational Highlights
On February 17, 2009, the Company announced that its wholly owned
subsidiary, Tailong Holding Company Limited ("Tailong"), signed
definitive agreements to purchase the remaining 10% equity interest
in Pacific Dragon Fertilizer Co., Ltd. ("Pacific Dragon") from
Yinlong Industrial Co., Ltd. The total consideration was $7.98
million, as determined by the accounting firm, KPMG New York, using
the fair-value evaluation method. The transaction is expected to
increase the Company's 2009 after-tax earnings by approximately
$0.05 per share. The Company has just received the necessary
approval from the Ministry of Commerce of the People's Republic of
China and expects to obtain the business license to complete this
acquisition in the near future. The transaction is expected to
close in early April 2009. On March 13, 2009, Mr. Ming Fang Zhu
became the Company's Chief Operating Officer. He joined Beijing
Agritech Fertilizer Co., Ltd., a wholly owned subsidiary of the
Company, in January 2006 as VP of Strategic Development and he
became President in April 2007 until March 2009. Prior to Agritech,
Mr. Zhu held senior management positions in a number of companies
in China. Mr. Zhu holds a bachelor's degree in physics, a master's
degree in economics, as well as a law degree. He is also is a
state-certified Economist in China. On March 16, 2009, the Company
announced it had completed the construction and testing of its
first facility for granular organic compound fertilizers in China.
Located in Anhui Province, the facility is expected to begin
production in April 2009. The new granular production line has a
designed annual production capacity of 100,000 tons. We obtained
the production license and fertilizer registration from the local
government in Anhui Province. The Beijing facility, which the
company initially built for granular manufacturing, will now be
converted into an R&D and core ingredients supply center. Other
Events Between March 11,2009 and March 13, 2009, Mr. Yu Chang,
Chairman, President and CEO of the Company, purchased a total of
27,012 common shares. One of the directors, Ms. Xiaorong Teng, also
purchased 20,000 common shares. These purchases were made in
accordance with Rule 10b-18 of the Securities and Exchange Act of
1934, as amended. Mr. Chang said, "While we are focusing on
building a strong organic fertilizer company to capture greater
market share in China, we believe the current stock price does not
reflect our long-term value. Our goal is to build long-term
shareholder value. We will continue to consider implementing a
company share buy back program as a way to preserve and enhance our
shareholder value, if there is an opportunity." Business Outlook
For the full year 2009, the Company is expecting net sales to be
approximately $60 million and net income to be approximately $9.5
million. These targets are based on the Company's current views on
the operating and market conditions, which are subject to change.
Mr. Chang concluded, "In 2009, we will leverage our R&D
platform to further broaden our product offerings. Our goal is to
use our market leading position to continue to grow our sales of
humic-acid based organic fertilizers through our existing national
sales network and our distribution partnership with Sinochem. On
the export front, we see good potential as we take advantage of the
Chinese government's new preferential export policies of increased
VAT refund. I am confident that with our proprietary granular
products, national distribution and manufacturing capacity and
favorable government policies to develop the rural economy, China
Agritech is well positioned for a profitable growth year in 2009."
Conference Call Information The Company will host a conference
call, to be simultaneously Webcast, on Wednesday, April 1, 2009, at
8:00 a.m. Eastern Daylight Time, or 8:00 p.m. Beijing Time. To
participate, please call +1-866-519-4004 (North America) or
1-800-819-0121(China). Conference ID # 93151614 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 Wednesday, April, 15, 2009 at 11:59 p.m. EDT. To access,
dial +1-612-8235-5000. Conference ID Number: 93151614. 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 regarding statements,
including, but not limited to, 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. CHINA AGRITECH, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, DECEMBER 31,
2008 2007 (AUDITED) (AUDITED) ASSETS Current Assets Cash and cash
equivalents $11,952,235 $11,841,221 Restricted cash -- 2,011,415
Accounts receivable, net 34,773,115 21,876,368 Inventories
6,452,618 3,508,741 Advances to suppliers 10,795,357 12,343,255
Prepayments and other receivables 2,484,346 1,242,693 Total Current
Assets 66,457,671 52,823,693 Property and equipment, net 4,496,045
3,798,958 Deposit for equipment 749,799 -- Construction in progress
961,551 -- Total Assets 72,665,066 56,622,651 LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities Accounts payable 3,327,281
41,146 Accrued expenses and other payables 221,954 229,049 Amount
due to related parties -- 352,505 Taxes payable 1,388,897 1,650,243
Total Current Liabilities 4,938,132 2,272,943 Minority Interest
4,928,434 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 December 31,2008 and December
31,2007 24,700 24,700 Additional paid in capital 26,148,879
26,135,914 Statutory reserve 5,425,407 4,299,653 Accumulated other
comprehensive income 5,837,917 2,578,107 Retained earnings
25,361,597 17,845,610 Total Stockholders' Equity 62,798,500
50,883,984 Total Liabilities and Stockholders' Equity 72,665,066
56,622,651 CHINA AGRITECH, INC. AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENTS THREE MONTHS PERIODS 12 MONTHS PERIODS ENDED
ENDED DECEMBER 31, DECEMBER 31, (Audited) (Audited) 2008 2007 2008
2007 Net sales $7,156,465 $7,934,150 $45,240,212 $38,008,580 Cost
of sales (4,460,320) (5,307,861) (24,889,387) (18,939,725) Gross
profit 2,696,144 2,626,289 20,350,825 19,068,855 Operating expenses
Selling expenses 646,822 505,612 (2,369,763) (1,723,869) Operating
and administrative expenses (1,561,923) (670,314) (4,265,655)
(2,418,895) Total operating expenses (915,101) (164,702)
(6,635,418) (4,142,764) Income from operations 1,781,044 2,461,587
13,715,407 14,926,091 Other income (expense) (27,295) 14,073
(56,165) (40,548) Interest income 6,082 114,637 91,984 152,400
Exchange gain (loss) 278,888 32,425 231,326 (271) Total other
income (expense) 257,675 161,135 267,145 111,581 Income before
income taxes and minority interest 2,038,719 2,622,722 13,982,552
15,037,672 Provision for income taxes (775,797) (938,932)
(4,151,782) (5,391,464) Income before minority interests 1,262,922
1,683,790 9,830,770 9,646,208 Minority interests (198,452)
(232,114) (1,189,029) (1,117,583) Net income 1,064,470 1,451,676
8,641,741 8,528,625 Other comprehensive income Foreign currency
translation adjustment (14,078) 622,391 3,259,810 1,976,819
Comprehensive income 1,050,392 2,074,067 11,901,551 10,505,444
Basic weighted average shares outstanding 24,699,615 24,811,761
24,699,615 21,868,338 Basic net earnings per share 0.04 0.06 0.35
0.39 Diluted weighted average shares outstanding 24,699,615
24,811,761 24,699,615 21,929,031 Diluted net earnings per share
0.04 0.06 0.35 0.39 CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 12 MONTHS PERIODS ENDED
DECEMBER 31, 2008 2007 (Audited) (Audited) Cash flows from
operating activities: Net income $8,641,741 $8,528,625 Adjustments
to reconcile net income to net cash used in operating activities:
Stock based compensation 12,965 37,942 Minority interest 1,189,029
1,117,583 Depreciation and amortization 549,341 390,736 Provision
for doubtful debts 195,616 57,745 (Increase) decrease in current
assets: Accounts receivable (11,306,241) (9,333,639) Inventories
(2,638,273) (2,186,497) Advances to suppliers 1,668,798 (3,626,775)
Prepayments and other receivable (1,503,874) (455,699) Due from
shareholders -- 22,532 Increase (decrease) in current liabilities:
Accounts payable 3,226,288 (357,627) Taxes payable (375,076)
532,043 Accrued expenses and other payables (553,730) 625,851 Net
cash used in operating activities (893,416) (4,647,180) Cash flows
from investing activities: Acquisition of property & equipment
(951,588) (1,429,517) Construction in progress (966,168) --
Restricted cash 11,415 88,821 Net cash used in investing activities
(1,906,341) (1,340,696) Cash flows from financing activities:
Amount held in escrow account 2,000,000 (2,000,000) Issuance of
shares for cash -- 13,484,478 Net cash provided by financing
activities 2,000,000 11,484,478 Net (decrease) in cash and cash
equivalents (799,757) 5,496,602 Effect of exchange rate change on
cash and cash equivalents 910,771 (85,390) Cash and cash
equivalents, beginning of year 11,841,221 6,430,009 Cash and cash
equivalents, end of year 11,952,235 11,841,221 Supplement
disclosure of cash flow information: Income taxes paid 4,437,384
5,266,039 Cash from issue of common stock placed in escrow account
-- 2,000,000 Non-cash Investment and Financing Activity: Offset of
amounts due to/from stockholders 320,666 -- For more information,
please contact: In China: China Agritech, Inc. Mr. Kelviz Lim Kok
Siak Investor Relations Tel: +86-10-5962-1220 Email: In the U.S.:
Grayling Mr. Kevin Theiss Investor Relations Tel: +1-646-284-9409
Email: Mr. Valentine Ding Investor Relations Tel: +1-646-284-9409
Email: DATASOURCE: China Agritech, Inc. CONTACT: China Agritech,
Inc., Mr. Kelviz Lim Kok Siak, Investor Relations,
+86-10-5962-1220, or Grayling, Mr. Kevin Theiss, Investor
Relations, +1-646-284-9409, and Mr. Valentine Ding, Investor
Relations, +1-646-284-9409, , both for China Agritech, Inc. Web
site: http://www.chinaagritechinc.com/
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