-- Revenue increases 52.5% to a Company record $11.6 million -- Net
income increases 130.8% to $2.6 million BEIJING, Nov. 15
/Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc. (OTC:CAGC)
(BULLETIN BOARD: CAGC) ("China Agritech" or "the Company"), a
leading manufacturer of liquid organic fertilizer and other
fertilizer products in China, today announced its financial results
for the third quarter ended September 30, 2007. Third Quarter
Highlights -- Revenue increased 52.5% year-over-year to a company
record $11.6 million -- Gross profit increased 54.0% to
year-over-year a company record $6.2 million -- Net income
increased 130.8% year-over-year to $2.6 million -- Established
strategic alliance and signed $7.8 million liquid fertilizer
contract with Sinochem Fertilizer Co., Ltd. ("Sinochem Fertilizer")
-- Completed $15 million private placement financing Third Quarter
2007 Results "We are pleased to see both record revenue and gross
profit during the third quarter as we rebounded from the impact of
the unusual weather conditions in China earlier this year,"
commented Mr. Yu Chang, Chief Executive Officer of China Agritech.
"During the quarter, we establish a strategic alliance with China's
largest fertilizer distributor, Sinochem Fertilizer. We believe our
relationship with Sinochem Fertilizer will contribute to China
Agritech penetrating new geographic markets within China as well as
our long-term revenue and net income growth." Revenue for the third
quarter of 2007 climbed 52.5% to $11.6 million, from $7.6 million
in the third quarter of 2006. The primary growth in revenue during
the quarter was due to a new distributor in northeastern China
purchasing 499 metric tons of liquid fertilizer for a total of $3.0
million. Revenue contribution from the Beijing and Anhui facilities
was 9%, up 72% from the second quarter of 2007. Gross profit for
the third quarter of 2007 was $6.2 million, up 54.0% from $4.0
million in the third quarter of 2006. Gross margin was 53.3%,
compared to 52.8% in the same period a year earlier. Gross margin
for the quarter benefited from a slight reduction in packaging
costs. Selling expenses during the quarter were $0.8 million, or
7.1% of revenue, up 21.4% from $0.7 million, or 8.9% of revenue, in
the third quarter 2006. The increase in selling expenses is
attributed to the additional selling and marketing expenses
incurred for the new facilities Beijing, Anhui, Chongqing and
Xinjiang. General and administrative expenses during the quarter
were $0.7 million, or 6.4% of revenue, compared to $1.1 million, or
14.2% of revenue, in the same period of 2006. The decrease in
administrative expenses is attributed to start-up costs associated
with the new factories and headquarters and the accrual of certain
bad debt allowances in third quarter 2006, which did not occur in
third quarter of 2007. Income from operations was $4.6 million, up
104.8% from $2.3 million in the same period of 2006. Operating
margin for the quarter was 39.8% compared to 29.7% in the third
quarter of 2006. Net income for the third quarter of 2007 was $2.6
million, up 130.8% from $1.1 million in the third quarter of 2006.
Fully diluted earnings per share were $0.10 for the third quarter
of 2007 compared to fully diluted earnings per share of $0.06 for
the same period a year earlier. Weighted average fully-diluted
outstanding shares for the third quarter of 2007 increased to
24,436,550 compared to weighted average fully-diluted outstanding
shares of 19,143,615 in the third quarter of 2006, as the result of
an additional 5,556,000 shares of common stock issued in a private
placement in July 2007. Nine Month Financial Results For the first
nine months of 2007, revenue increased to $30.1 million, up 27.9%
from $23.5 million in the first nine months of 2006. Gross profit
increased 34.6% in the first nine months of 2007 to $16.4 million
from $12.2 million in the comparable period a year ago. Gross
margin was 54.7% in the first nine months of 2007 compared to 51.9%
in the first nine months of 2006. Income from operations increased
54.1% to $12.5 million compared to $8.1 million in the same period
a year ago. Net income for the first nine months of 2007 was $7.1
million, or $0.34 per fully diluted share, up 68.1% from $4.2
million, or $0.23 per fully diluted share, in the first nine months
of 2006. Financial Condition As of September 30, 2007, China
Agritech had $13.7 million in cash, restricted cash and cash
equivalents, working capital of $48.3 million (of which $2.0
million is restricted or held in escrow) and no long-term debt.
Days sales outstanding for the third quarter 2007 was 203 days,
compared to 189 days in the third quarter 2006. Shareholders'
equity stood at $48.9 million as of September 30, 2007, up from
$26.9 million as of December 31, 2006. Subsequent Event On October
9, 2007, China Agritech signed a contract with Sinochem Fertilizer
Co., Ltd. (Sinochem Fertilizer) to deliver a minimum of 1,000
metric tons of its liquid organic fertilizer "Green Vitality" over
the next twelve months. The order is expected to contribute $7.8
million to China Agritech's revenue over the term of the contract.
China Agritech has engaged Ernst & Young to assist the Company
in becoming SOX 404 compliant. Business Outlook Through China
Agritech's strategic alliance with Sinochem, the Company expects
that it will accelerate its geographic expansion throughout China,
specifically in the central and southern regions. The agriculture
season is year round in the southern region with the strongest
growing season from the second through fourth calendar quarters,
while in the central and northern regions the majority of the
growing season occurs during the second and third calendar
quarters. As a result, the geographic expansion should minimize the
impact of seasonal fluctuation on revenue and net income. China
Agritech is expanding its product line to include the production of
organic granular fertilizer at or near each of its four new
factories. Total capacity is expected to be 200,000 metric tons in
2008. The Company completed the site selection and has ordered the
equipment for the facilities in Beijing, Heilongjiang, and
Xinjiang. China Agritech expects the equipment to be delivered and
installed by late November or beginning of December, 2007. China
Agritech is evaluating the location of the fourth granular
fertilizer facility. Capital expenditures for the rest of 2007 are
expected to be $6.0 million. China Agritech expects revenue for the
year-end 2007 to be in the range of $38.0 and $40.0 million, down
from its previous guidance of $46.0 to $48.0 million. The Company
reaffirms its previous guidance for year-end 2007 net income to be
in the range of $8.4 to $8.6 million. "We have made tremendous
progress this quarter in expanding our market penetration and
bringing our organic granular fertilizer production online. The
market opportunity remains robust for organic and pollution-free
produce as consumers are demanding healthy food and the government
is encouraging farmers to implement sustainable agricultural
production," concluded Mr. Chang. "We also expect the collaboration
with Sinochem Fertilizer will accelerate our market expansion as
China Agritech seeks to become a leading organic fertilizer company
China." Conference Call Information Management will conduct a
conference call to discuss China Agritech's third quarter financial
results and provide a corporate overview. The conference call will
take place at 9:00 am EST on Thursday, November 15, 2007. Hosting
the call will be Mr. Kelviz Lim Kok Siak, Vice President of
Finance, joined by Mr. Yu Chang, Chief Executive Officer of China
Agritech. To participate in the conference call, please dial the
following number five to ten minutes prior to the scheduled
conference call time: (888) 482-0024. International callers should
dial 617-801-9702. The pass code for the call is 868 437 44. If you
are unable to participate in the call at this time, a replay will
be available on Thursday, November 15, 2007 at 11:00 a.m. ET,
through Thursday, November 22, 2007. To access the replay from the
United States dial 888-286-8010, or 617-801-6888 if calling
internationally. Enter the conference ID number 49932500. This
conference call will be broadcast live over the Internet and can be
accessed by all interested parties on the China Agritech website at
http://www.chinaagritechinc.com/ . To listen to the live webcast,
please go to the China Agritech website at least fifteen minutes
prior to the start of the call to register, download, and install
any necessary audio software. For those unable to participate
during the live broadcast, a replay will be available shortly after
the call on China Agritech's website for 90 days. About China
Agritech China Agritech is engaged in the development,
manufacturing and distribution of organic liquid compound
fertilizers and related products in the People's Republic of China.
The Company is currently in the process of expanding its production
facilities to include organic granular fertilizer. China Agritech
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
fourteen provinces throughout northern, central and southern China.
For more information visit http://www.chinaagritechinc.com/ . 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. CHINA AGRITECH, INC.
CONSOLIDATED BALANCE SHEETS September December 30, 2007 31, 2006
(UNAUDITED) ASSETS Current Assets Cash and cash equivalents $
13,697,914 $ 6,430,009 Restricted cash 37,302 100,028 Account held
in escrow account 2,000,000 -- Accounts receivable, net 30,172,419
12,239,073 Inventories 5,802,349 1,322,244 Advances to suppliers
488,244 8,038,974 Prepayments and other receivables 493,136 382,463
Total Current Assets 52,691,363 28,512,791 Property, Plant, And
Equipment, Net 3,717,358 2,514,123 Total Assets $ 56,408,721 $
31,026,914 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
Accounts payable $ 241,599 $ 108,886 Accrued liabilities and other
payables 1,976,851 871,495 Amount due to related parties 22,545 954
Taxes payable 2,190,866 1,028,885 Total Current Liabilities
4,431,861 2,010,220 Minority Interests 3,153,402 2,160,575
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, 2007 and 19,143,615 shares issued
and outstanding as of December 31, 2006 24,700 19,144 Additional
paid in capital 26,149,455 12,619,049 Statutory Reserve 3,987,261
2,790,916 Accumulated other comprehensive 1,955,716 601,288 income
Retained earnings 16,706,326 10,825,722 Total Stockholders' Equity
48,823,458 26,856,119 Total Liabilities and Stockholders' Equity
56,408,721 31,026,914 CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTH AND NINE MONTH
PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) THREE MONTH
NINE MONTH PERIODS ENDED PERIODS ENDED SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 Net sales $11,595,798 $7,601,819 $30,074,430
$23,522,609 Cost of sales 5,415,761 3,589,872 13,631,864 11,307,639
Gross profit 6,180,038 4,011,947 16,442,566 12,214,970 Selling
expenses 824,695 679,211 2,229,481 1,840,740 General and
administrative expenses 736,424 1,076,929 1,748,581 2,286,372 Total
operating expenses 1,561,119 1,756,140 3,978,062 4,127,112 Income
from operations 4,618,918 2,255,807 12,464,504 8,087,858 Other
income (expense) Other (expense) income (78,298) (6,854) (46,417)
(39,143) Finance income (expense) (1,211) (11,654) (3,137) (1,813)
Total other income (expense) (79,509) (18,508) (49,554) (40,956)
Income before income taxes and minority interest 4,539,410
2,237,299 12,414,950 8,046,902 Provision for income taxes 1,648,340
938,523 4,452,532 3,188,858 Income before minority interests
2,891,070 1,298,776 7,962,418 4,858,044 Minority interests 333,392
190,550 885,469 647,688 Net income $2,557,677 $1,108,226 $7,076,949
$4,210,356 Other comprehensive income Foreign currency translation
adjustment 522,655 455,463 1,354,428 367,329 Comprehensive income
$3,080,333 $1,563,689 $8,431,377 $4,577,685 Basic weighted average
shares outstanding 24,397,658 19,143,615 20,914,208 18,614,203
Basic net earnings per share $0.10 $0.06 $0.34 $0.23 Diluted
weighted average shares outstanding 24,436,550 19,143,615
20,954,725 18,614,203 Diluted net earning per shares $0.10 $0.06
$0.34 $0.23 CHINA AGRITECH, INC. AND ITS SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER
30, 2007 AND 2006 (UNAUDITED) 2007 2006 Cash flows from operating
activities: Net income $ 7,076,949 $ 4,210,356 Adjustments to
reconcile net income to net cash used in operating activities:
Stock based compensation 51,484 2,398 Minority Interest 885,469
647,688 Depreciation 259,542 90,471 Provision for doubtful debts --
-- Decrease (increase) in current assets: Restricted cash 62,944
95,598 Accounts receivable (17,070,111) (439,351) Other receivable
(66,012) (8,454,017) Inventory (4,033,019) 139,423 Advances to
suppliers 7,717,799 (822,746) Prepaid expenses (86,176) 643,490
Advances from shareholders 22,507 (162,996) Increase (decrease) in
current liabilities: Accounts payable (157,478) 1,450,674 Other
payable 736,890 Tax payable 1,096,563 458,853 Accrued expenses
313,970 130,554 Net cash used in operating activities (3,188,677)
(2,009,605) Cash flows from investing activities: Acquisition of
property & equipment (1,459,705) (1,267,032) Construction in
progress (3,009) -- Net cash used in investing activities
(1,462,714) (1,267,032) Cash flows from financing activities:
Amount held in escrow account (2,000,000) -- Issuance of shares for
cash 13,484,478 11,081,575 Net cash provided by financing
activities 11,484,478 11,081,575 Effect of exchange rate change on
cash and cash equivalents 428,879 79,523 Net increase in cash and
cash equivalents 7,261,965 7,884,461 Cash and cash equivalents,
beginning of year 6,430,009 249,823 Cash and cash equivalents, end
of year $ 13,691,974 $ 8,134,284 Supplement disclosure of cash flow
information: Interest expense paid $ -- $ -- Income taxes paid $
3,595,008 $ 2,823,332 For more information, please contact: CCG
Elite Investor Relations Crocker Coulson, President Leslie
Richardson, Financial Writer Tel: +1-646-213-1915 Email: Kelviz Lim
China Agritech, Inc. Tel: +86-10-5962-1220 DATASOURCE: China
Agritech, Inc. CONTACT: Crocker Coulson, President of CCG Elite
Investor Relations, or Leslie Richardson, Financial Writer of CCG
Elite Investor Relations, +1-646- 213-1915, or ; Or Kelviz Lim of
China Agritech, Inc., +86-10-5962-1220 Web Site:
http://www.chinaagritechinc.com/
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