BEIJING, Aug. 12 /PRNewswire-Asia-FirstCall/ -- China
Agritech, Inc. (Nasdaq: CAGC) ("China Agritech", or the "Company"),
a leading organic compound fertilizer manufacturer and distributor
in the People's Republic of China,
today announced its unaudited financial results for the second
quarter and six months ended June 30,
2010.
Second Quarter Financial Highlights
-- Net revenue increased 63% year-over-year to a quarterly record of $34.3
million;
-- Gross profit increased 33% year-over-year to $11.9 million with a 34.7%
gross margin;
-- Net income was $21 million, or Diluted EPS $1.05;
-- Cash and cash equivalents were $51.7 million with no debt.
Mr. Yu Chang, Chief Executive
Officer of China Agritech, commented, "We are very pleased with our
second quarter performance as our granular products sales are
experiencing accelerating growth. We are not only increasing our
customer base and broadening geographic penetration, but also
receiving more inquiries from farmers and distributors on the
functionalities of our product, as more and more agricultural
regions are affected by climate change and deteriorating soil
conditions. As China is facing challenges of both food safety and
food shortage, the organic food market is becoming an important
sector due to its sustainable volume growth and high-quality
nutritional standard. More farmers are willing to grow organic
grains, fruits and vegetables because the end market is paying
higher prices for quality products. We will continue to increase
our R&D investment and roll out more products to meet the
growing demand in China. Our goals of extending our market
leadership and maximizing our long-term shareholders' value remain
unchanged."
Mr. Chang continued, "Compared with liquid organic fertilizer,
granular organic fertilizer has only emerged in the recent few
years. However, due to its efficacy in plant growth, nutrient
preservation, ease for transportation and favorable pricing,
granular organic fertilizer has been well received by farmers.
Moreover, the growing adoption of granular fertilizer also boosts
the demand of liquid organic fertilizer as their different
functions for different stages of farming. After over 2 years'
preparation of technology upgrades and production facility
constructions, we now the largest commercial producer of granular
organic fertilizer with a number of mature products and well
established production capacity, and we are moving full speed on
market share acquisition."
Second Quarter 2010 Results
Net revenue grew 63% year-over-year to a quarterly record of
$34.3 million from $21.0 million in the second quarter last year.
Liquid fertilizer sales increased year-over-year by 46% to
approximately $20.0 million, while
granular fertilizer sales posted a year-over-year 95% increase to
reach approximately $14.3 million.
Organic granular fertilizer continued to gain traction among
farmers during the quarter, while the sales of organic liquid
fertilizer is expected to further accelerate during the growing
season starting from May. The increase of organic liquid fertilizer
sales also reflected the expansion of the Company's customer base
to newly established markets in the central and southern regions of
China.
Gross profit increased 33% year-over-year to a quarterly record
of $11.9 million from $9.0 million for the same quarter last year.
Blended gross margin for the second quarter was 34.7% compared with
42.7% for the same period in 2009. The decrease was primarily due
to the ongoing shift in the product mix as the Company increases
its share of the comparatively lower-margined organic granular
products. Specifically, organic granular fertilizer recorded a
gross profit margin of 20.3%, in line with the same period of 2009.
Organic liquid fertilizer products had a gross profit margin of
45.1% compared with 53.2% for the same period in 2009. The decrease
in gross margin for the organic liquid fertilizer was due to the
changed composition of organic liquid fertilizer products, in which
more raw materials lowered the profit margin.
Selling expenses were $1.3
million, or 3.8% of revenue, compared with $0.6 million, or 3.0% in the second quarter of
2009. The increase in both absolute value and as percentage of
revenue in selling expenses was mainly due to increased promotion
expenses and handling charges proportional to the increase in
sales.
General and administrative expenses were $3.8 million, or 8.9% of revenue, compared with
$0.9 million, or 4.2% of revenue, for
the same period in 2009. The increase in administrative expenses
was mainly due to increased research and development costs and
share-based compensation. During the second quarter of 2010, the
share-based compensation was $1.4
million as compared with $2,700 in the same period of 2009.
Income from operations was $7.5
million, in line with the same quarter of 2009.
Excluding the non-deductible charge for the change in fair value
of warrants of $13.3 million and gain
on extinguishment of warrants classified as derivatives of
$1.6 million, our effective tax rate
for the second quarter of 2010 would have been 18.9%, as compared
to 21.5% for the same period in 2009. The decrease in effective tax
rate was due to one of the operating subsidiary in China that
generated net operating profit for the quarter still enjoying the
tax rate reduction and subject to the income tax rate of 12.5%.
GAAP net income for the second quarter of 2010 was $21.0 million compared with $5.6 million in the same period of 2009. Diluted
earnings per share of $1.05 on a
substantially greater number of shares outstanding, compared with
diluted earnings per share of $0.44
in the previous year's same quarter.
Excluding the non-cash gain in the fair value of warrants, gain
on extinguishment of warrants, and share-based compensation,
non-GAAP net income attributable to common stockholders for the
second quarter of 2010 was $7.3
million, up 30.4% from $5.6
million in the same period last year. Non-GAAP diluted
earnings per share were $0.37 versus
$0.44 for the same quarter in 2009,
but on substantially greater number of shares outstanding in the
2010 period. Diluted weighted average number of shares outstanding
for the second quarter of 2010 was 19.7 million compared with 12.7
million shares in the second quarter of 2009.
Six Month Results
Total revenue for the first six months of 2010 increased 91.2%
year-over- year to $54.1 million from
$28.3 million for the first six
months last year. Gross profit for the first six months of 2010 was
$18.4 million, up 49.2% from
$12.3 million in the comparable
period a year ago. Gross margin was 33.9% for the first six months
of 2010, lower than the 43.5% for the same period in 2009 as the
result of increased sales of the lower-margin granular products.
Income from operations was $11.1
million, up 17.2% from $9.4
million in the first six months of 2009. GAAP net income was
$13.9 million, with fully diluted
earnings per share of $0.72, compared
with $6.6 million, or diluted
earnings per share of $0.53 in the
first six months of 2009.
Financial Conditions
As of June 30, 2010, total cash
and cash equivalents were $51.7
million as compared to $20.3
million on December 31, 2009.
Stockholders' equity increased to $140.9
million as of June 30, 2010
from $77.3 million as of December 31, 2009.
Recent Events
In May, 2010 the Company closed its previously announced public
offering of 1,243,000 shares of common stock. Total gross proceeds
from the offering and over-allotment were approximately
$23.0 million. The Company intends to
use the net proceeds from this offering to establish branded
large-scale distribution centers and the remainder of the net
proceeds, if any, for working capital and general corporate
purposes.
In May, 2010, the Company signed a renewal contract with
Sinochem for the sale of the Company's "Green Vitality" organic
liquid fertilizers. Pursuant to the agreement, China Agritech will
supply Green Vitality liquid fertilizer worth an estimated value of
RMB 61 million (approximately
US$9 million). This contract is in
effect through April 2011. The
Company will continue to supply Sinochem with "Green Vitality"
granular fertilizer under another existing contract.
In June, 2010, the Company received $10
million as a result of the exercise of common stock warrants
held by Carlyle Asia Growth Partners IV, L.P. and CAGP IV
Co-Investment, L.P., two affiliates of The Carlyle Group. The
Carlyle Group affiliates originally acquired the warrants in
connection with the Company's private placement, consummated in
October 2009.
Business Outlook
The Company reiterates its guidance for the year ending
December 31, 2010 with revenues
expected to reach approximately $114
million and non-GAAP net income, which excludes the change
in the fair value of warrants issued, gain on extinguishment of
warrant liability, and stock-based compensation, of approximately
$23.5 million, representing a
year-over-year growth of 50% and 45% on revenues and non-GAAP net
income, respectively. These targets are based upon the Company's
current views on operating and market conditions, which are subject
to change. This guidance follows 68.3% revenue growth since (?)
2009.
"While we are encouraged by our solid performance in the first
half of the year, we expect that the second half will be stronger
as the peak farming season is unfolding and our products are
gaining traction. Our balance sheet is now strengthened and we
expect that our cash flow will continue to improve. With our
product portfolio, growing R&D capability, nationwide
distribution footprint and strong financial standing, we believe
that we are well positioned to capture the wave of the organic food
market growth in China," Mr. Yu
Chang, Chairman and Chief Executive Officer of China
Agritech, concluded.
Conference Call
The Company will host a conference call, to be simultaneously
webcast on Thursday, August 12, 2010
at 9:00 a.m. Eastern Daylight Time,
or 9:00 p.m. Beijing Time.
To participate, please call the following phone numbers:
United States 1-866-519-4004 or 1-718-354-1231
China, Domestic 800-819-0121-Landline or 400-620-8038 - Mobile
Hong Kong 852-2475-0994 or 800-930-346
Canada 866-386-1016
International Toll Dial-In Number: +656-723-9381
Conference ID # 89992339
A live web cast 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 web cast and download any necessary audio software.
A web cast replay will be available on the Company's website,
and the call replay will be available through Wednesday, August 18, 2010 at 11:59 p.m. EDT. To access the replay, please call
the following phone numbers:
United States Dial-In #: 1-866-214-5335
Canada Dial-In #: 1-800-301-5423
China North Dial-In #: 10-800-714-0386
China South Dial-In #: 10-800-140-0386
Hong Kong Dial-In #: 800-901-596
International Dial-In #: +61 2 8235 5000
Conference ID # 89992339
About China Agritech, Inc.
China Agritech, Inc. is engaged in the development, manufacture
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 28
provinces of China. For more information, please visit
http://www.chinaagritechinc.com .
Safe Harbor Statement
This press release contains certain statements that may be
deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical facts, that address activities,
events or developments that the Company expects, projects, believes
or anticipates will or may occur in the future, including, without
limitation, statements about its business or growth strategy,
general industry conditions, future operating results of the
Company, capital expenditures, expansion and growth opportunities,
financing activities and other such matters, are forward-looking
statements. Although the Company believes that its expectations
stated in this press release are based on reasonable assumptions,
actual results may differ from those projected in the
forward-looking statements. 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 update or alter its forward-looking
statements whether as a result of new information, future events or
otherwise.
Use of Non-GAAP Financial Measures
The non-GAAP adjusted net income and earnings per share
information should not be considered an alternative to, or more
meaningful than, net income and earnings per share as determined in
accordance with GAAP, since it omits the impact of the change in
fair value of warrants. Management believes that the presentation
of this non-GAAP financial measure is warranted and useful to its
stockholders because it provides an additional analytical tool for
understanding the Company's financial performance by excluding
certain items that may obscure trends in the core operating
performance of the Company's business.
For more information, please contact:
In China:
Gareth Tang
Chief Financial Officer
China Agritech, Inc.
Email: gareth@chinaagritech.com
In the U.S.:
Shiwei Yin/Kevin Theiss
Investor Relations
Grayling
Phone: +1-646-284-9474
Email: shiwei.yin@grayling.com
- Tables to follow -
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, US$)
June 30, December 31,
2010 2009
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $51,738,535 $20,313,089
Accounts receivable, net 51,203,710 39,256,098
Inventories 18,424,145 6,606,095
Advances to suppliers 13,800,659 25,348,687
Prepayments and other receivables 5,175,062 2,287,220
Total Current Assets 140,342,111 93,811,189
Property, plant and equipment, net 6,117,778 5,980,696
Construction in progress 493,433 424,006
Intangible assets, net 368,421 397,507
Total Assets $147,321,743 $100,613,398
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable $1,532,487 $62,616
Accrued expenses and other payables 2,554,517 1,394,357
Warrant liabilities -- 20,157,869
Taxes payable 2,293,808 1,695,665
Total Current Liabilities 6,380,812 23,310,507
Stockholders' Equity
Preferred stock: $0.001 par value,
10,000,000 shares authorized,
none issued -- --
Common stock: $0.001 par value;
100,000,000 shares authorized,
20,766,243 and 17,002,542* shares
issued and outstanding as of June
30, 2010 and December 31, 2009,
respectively 20,766 17,003
Additional paid in capital 83,784,969 34,698,079
Statutory reserves 2,195,818 2,195,818
Accumulated other comprehensive
income 6,402,728 5,723,265
Retained earnings 48,536,650 34,668,726
Total Equity 140,940,931 77,302,891
Total Liabilities and
Stockholders' Equity $147,321,743 $100,613,398
*as retroactively adjusted for the 1-for-4 reverse stock split on
September 8, 2009 and the 2-for-1 forward stock split on February 1, 2010.
CHINA AGRITECH, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDING JUNE 30,
(Unaudited, US$)
For the Three Months Ended For the Six Months ended
June 30, June 30,
2010 2009 2010 2009
Net revenue $34,268,842 $20,988,611 $54,182,722 $28,335,987
Cost of revenue (22,384,633) (12,033,792) (35,799,677) (16,012,477)
Gross profit 11,884,209 8,954,819 18,383,045 12,323,510
Operating expenses:
Selling expenses (1,286,505) (624,993) (1,846,274) (1,030,712)
General and
administrative
expenses (3,057,466) (871,838) (5,474,192) (1,855,513)
Total operating
expenses (4,343,971) (1,496,831) (7,320,466) (2,886,225)
Income from
operations 7,540,238 7,457,988 11,062,579 9,437,285
Other income
(expense)
Interest income 17,095 3,451 28,441 6,024
Exchange gain
(loss) 1,231 (2,609) 1,066 (3,056)
Gain on
extinguishment of
warrant liability 1,629,465 -- 1,629,465 --
Changes in fair
value of warrants
classified as
derivatives 13,307,462 -- 3,829,985 --
Other income (18,024) -- (18,024) --
Total other
income (expense) 14,937,229 842 5,470,933 2,968
Income before
income taxes 22,477,467 7,458,830 16,533,512 9,440,253
Provision for
income taxes (1,689,490) (1,601,958) (2,665,588) (2,316,236)
Net income 20,787,977 5,856,872 13,867,924 7,124,017
Net income
attributable to
non-controlling
interest in a
subsidiary -- (267,169) -- (481,452)
Net income
attributable to
China Agritech's
common
stockholders 20,787,977 5,589,703 13,867,924 6,642,565
Other
comprehensive
income:
Foreign currency
translation
adjustment 624,896 (22,528) 679,463 (124,341)
Comprehensive
income 21,412,873 5,567,175 14,547,387 6,518,224
Comprehensive
income
attributable to
non-controlling
interest
in a subsidiary -- (8,814) -- 8,403
Comprehensive
income
attributable to
China Agritech's
common
stockholders $21,412,873 $5,558,361 $14,547,386 $6,526,627
Net income per
share:
- Basic $1.12 $0.44* $0.77 $0.53*
- Diluted $1.05 $0.44* $0.72 $0.53*
Weighted average
number of shares
outstanding:
- Basic 18,594,916 12,656,621* 17,952,950 12,504,062*
- Diluted 19,749,122 12,656,621* 19,306,827 12,504,062*
*as retroactively adjusted for the 1-for-4 reverse stock split on
September 8, 2009 and the 2-for-1 forward stock split on February 1, 2010.
CHINA AGRITECH, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR SIX MONTHS
ENDED JUNE 30, 2010 AND 2009
(Unaudited, US$)
For the Six Months Ended June 30,
2010 2009
Cash flows from operating activities:
Net income $13,867,924 $7,124,017
Adjustments to reconcile net income
to cash provided by operating
activities:
Share-based compensation 2,146,754 2,703
Changes in fair value of warrants
classified as derivatives (3,829,985) --
Gain on extinguishment of warrant
liability (1,629,465) --
Depreciation and amortization of
property, plant and equipment 348,240 320,109
Amortization of intangible assets 31,393 --
Reversal of allowance for doubtful
debts (659) --
Decrease / (Increase) in current
assets:
Accounts receivable (11,647,188) (8,937,538)
Inventories (11,712,387) (4,967,706)
Advances to suppliers 13,088,615 3,601,066
Prepayments and other receivable (1,675,598) 276,024
Increase in current liabilities:
Accounts payable 1,462,049 7,467,145
Tax payables 581,076 1,038,862
Accrued expenses and other payables 17,390 2,114,634
Net cash provided by operating
activities 1,048,159 8,039,316
Cash flows from investing activities:
Acquisition of 10% interest of
Pacific Dragon -- (1,000,000)
Acquisition of property, plant and
equipment (449,954) (2,200,669)
Construction in progress (66,601) 163,161
Net cash used in investing
activities (516,555) (3,037,508)
Cash flows from financing activities:
Issuance of shares for cash in
public offering 20,828,197 --
Proceeds from exercise of warrants 10,000,074 --
Net cash provided by financing
activities 30,828,271 --
Net increase in cash and cash
equivalents 31,359,875 5,001,808
Effect of exchange rate change on
cash and cash equivalents 65,571 (438,639)
Cash and cash equivalents, beginning
of period 20,313,089 11,952,235
Cash and cash equivalents, end of
period $51,738,535 $16,515,404
Supplement disclosure of cash flow
information:
Cash paid for interest -- --
Cash paid for income tax $$2,271,296 $2,316,236
SOURCE China Agritech, Inc.
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