-- Net Sales decreased 15% to $7.3 million -- Net income decreased
37% to $1.2 million BEIJING, China, May 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 first quarter ended March 31,2008. First Quarter Highlights
-- Revenue decreased 15% year-over-year to $7.3 million -- Gross
profit decreased 19% year-over-year to $3.6 million -- Net income
decreased 37% year-over-year to $1.2 million, or $0.05 per diluted
share 'China Agritech's lower first quarter results were
significantly impacted by severe weather conditions caused by heavy
rainfall and the longer winter season in northeast China,'
commented Mr. Yu Chang, Chief Executive Officer of China Agritech.
'The climate change not only affected consumption of our fertilizer
products, but also caused delays in delivering orders to our
customers. The deferred orders will be delivered by our
distributors in the second quarter. The delayed orders should bring
our revenue back on the growth track.' Revenue for the first
quarter of 2008 was down 15.0% to $7.3 million from $8.6 million in
the first quarter of 2007. Revenue declined as a result of a
decrease in sales volume, due to the impact of extended cold
weather and heavy rains in northeast China. Unfavorable weather
conditions resulted in deferred orders and delayed deliveries.
However, the Company observed improved sales in the beginning of
the second quarter. In April, customer orders increased by 10% in
the Northern region and 15% in the Southern region compared to the
same period last year. Gross profit for the first quarter of 2008
was $3.6 million, down 19.4% from gross profit of $4.5 million in
the first quarter of 2007. Gross margin for the quarter was 49.7%
compared to 52.4% in the first quarter of 2007. On a sequential
basis, gross margin improved from 42.3% in the fourth quarter of
2007. The sequential improvement in gross margin was primarily due
to the Company's success in negotiating both packaging and raw
materials cost with its suppliers. Selling expenses during the
quarter was $0.7 million, or 9.7% of revenue, up from $0.6 million,
or 7.1% of revenue, in the first quarter of 2007. The increase of
selling expenses was primarily due to an increase in sales
personnel to total 134 in the first quarter 2008, compared to 96 in
the same quarter one year ago. The Company also carried greater
selling and marketing activities in the quarter to develop new
geographical markets. General and administrative expenses during
the quarter were $0.9 million, or 11.9% of revenue, compared to
$0.5 million, or 6.4% of revenue, in the same period of 2007. The
increase in G&A was primarily attributable to legal and
professional consulting fees such as SOX 404 and SEC maintenance
and general legal advice for long term company planning. Income
from operations was $2.1 million, down 38.6% from $3.3 million in
the same period of 2007. Operating margin for the quarter was 28.1%
compared to 38.9% in the first quarter of 2007. Net income for the
first quarter of 2008 was $1.2 million, down 36.9% from $1.9
million in the first quarter of 2007. Fully diluted earnings per
share were $0.05 for the first quarter of 2008 compared to fully
diluted earnings per share of $0.10 for the same period a year
earlier. Weighted average fully-diluted shares for the first
quarter of 2008 increased to 24,699,615 compared to weighted
average fully-diluted shares of 19,143,615 in the first quarter of
2007, as the result of an additional 5,556,000 shares of common
stock issued in a private placement in July 2007. Financial
Condition As of March 31, 2008, China Agritech had $11.7 million in
cash and restricted cash, no long-term debt and $53.2 million in
working capital. Days sales outstanding as of March 31, 2008 was
276 days, compared to 206 days as of March 31, 2007. Inventory
turnover days were 79 days as of March 31, 2008, compared to 68
days as of March 31, 2007. Shareholders' equity stood at $53.4
million up from $50.9 million at year end 2007. Recent Event On
April 25, 2008, China Agritech announced that it has engaged
Grobstein, Horwath & Company, LLP ('Grobstein, Horwath &
Co.'), a Horwath International firm, as its new independent
auditor, effective April 18, 2008. Grobstein, Horwath & Co.
replaces Kabani & Co. LLP ('Kabani & Co.'), which was
dismissed on April 18, 2008. Business Outlook China Agritech
completed its first granular fertilizer factory with 50,000 metric
tons capacity in Beijing in March 2008 which expected to start its
commercial production by end of May of 2008 or early June of 2008.
The Company is also considering options to acquire an existing
granular fertilizer factory to expand its production capacity. It
plans to acquire a well-run facility with established markets in
the Anhui province and has currently initiated the evaluation
process. The two granular factories in Harbin and Xinjiang expect
to start the construction in June of 2008. Currently, the Company
is working on the floor plan for these two factories, respectively.
The Company anticipates fewer orders of its 'Green Vitality' liquid
organic fertilizer from Sinochem Fertilizer Co., Ltd. than the
1,000 metric tons for the twelve month period following October
2007, as agreed to in the original contract. Recent earthquake in
Sichuan province has also affected the sales expected from this
region. Therefore, China Agritech is adjusting its previous
guidance for full year 2008 downward to revenue of $54 - $56
million, and net income to $8.5 - $9.0 million, or earnings per
share of $0.35 to $0.37. Conference Call Information Management
will conduct a conference call at at 8:00 am EDT on Thursday,
May15, 2008, to discuss results for the first quarter 2008. 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. The Company plans to distribute its earnings on
Wednesday, May 14, 2008 after markets close. To participate in the
conference call, please dial the following number five to ten
minutes prior to the scheduled conference call time: (888)
419-5570. International callers should dial 617-896-9871. The pass
code for the call is 255 961 45. If you are unable to participate
in the call at this time, a replay will be available on Thursday,
May 15, 2008 at 10:00 a.m. EDT, through Thursday, May 29, 2008. To
access the replay from the United States dial 888- 286-8010, or
617-801-6888 if calling internationally. Enter the Pass code
57612944. This conference call will be broadcast live over the
Internet and can be accessed by all interested parties on the China
Agritech website athttp://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 Inc. China Agritech is engaged in the
development, manufacture and distribution of organic liquid and
granular compound fertilizers and related products in the People's
Republic of China. The company has developed proprietary formulas
that provide a continuous supply of high-quality agricultural
products while maintaining soil fertility. The company sells it
products to farmers located in twenty provinces of China including:
Hainan, Anhui, Hubei, Jiangsu, Jiangxi, Guangxi, Liaoning, Shanxi
Heilongjiang, Hebei, Jilin, Shandong, Inner Mongolia, Henan,
Sichuan, Guangdong, Xinjiang, Yunnan, Chongqing and Guizhou. 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. --financial tables below--
CHINA AGRITECH, INC. AND SUBSIDIARIES CONSOLIDATED INCOME
STATEMENTS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2008 AND
2007 (UNAUDITED) 2008 2007 Net sales $ 7,317,083 $ 8,611,741 Cost
of sales (3,681,006) (4,100,825) Gross profit 3,636,077 4,510,916
Operating expenses Selling expenses (706,590) (614,002) General and
administrative expenses (873,554) (548,067) Total operating
expenses (1,580,144) (1,162,069) Income from operations 2,055,933
3,348,847 Other expenses Other (expenses)/income 61,673 27,896
Finance expenses 5,227 (209) Total other expenses/(income) 66,900
27,687 Income before income taxes and minority interest 2,122,833
3,376,534 Provision for income taxes (717,280) (1,260,055) Income
before minority interests 1,405,554 2,116,479 Minority interests
(215,184) (231,351) Net income 1,190,370 1,885,128 Other
comprehensive income Foreign currency translation adjustment
1,318,663 504,648 2,389,776 Comprehensive income $ 2,509,033 $
Basic and diluted weighted average shares outstanding 24,699,615
19,143,615 Basic net earnings per share $ 0.05 $ 0.10 Diluted
weighted average shares outstanding 24,699,615 19,143,615 Diluted
net earnings per share $ 0.05 $ 0.10 CHINA AGRITECH, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, March 31,
2008 2007 (UNAUDITED) (AUDITED) ASSETS Current Assets Cash and cash
equivalents $ 9,744,105 $ 11,852,636 Restricted cash 2,000,000
2,000,000 Accounts receivable, net 28,693,391 22,695,039
Inventories 4,017,007 3,508,741 Advances to suppliers 10,877,770
12,343,255 Prepayments and other receivables 768,401 1,242,694
Total Current Assets 56,100,674 53,642,365 Construction In Process
157,651 -- Property, Plant, And Equipment, Net 3,857,576 3,798,958
Total Assets $ 60,115,901 $ 57,441,323 LIABILITIES AND
SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 245,522
$ 41,146 Accrued liabilities and other payables 1,385,420 1,047,721
Amount due to related parties -- 352,505 Taxes payable 1,251,977
1,650,243 Total Current Liabilities 2,882,919 3,091,615 Minority
Interests 3,839,963 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, 7 200and 19,143,615 shares issued and outstanding as
of December 31, 2006 24,700 24,700 Additional paid in capital
26,135,914 26,135,914 Statutory reserve 4,590,152 4,299,653
Accumulated other comprehensive income 3,896,770 2,578,107 Retained
earnings 18,745,483 17,845,610 Total Stockholders' Equity
53,393,019 50,883,984 Total Liabilities and Stockholders' Equity $
60,115,901 $ 57,441,323 CHINA AGRITECH, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2008 AND 2007 (UNAUDITED) March 31, March 31, 2008
2007 Cash flows from operating activities: Net income $1,190,370
$1,885,128 Adjustments to reconcile net income to net cash used in
operating activities: Stock based compensation -- 1,199 Minority
Interest 215,184 231,351 Depreciation 169,073 81,140 (Increase) /
Decrease in current assets: Accounts receivable (5,998,352)
(5,944,426) Prepayments and other receivables 474,295 6,016
Inventories (508,266) (1,340,544) Advances to suppliers 1,465,485
2,810,417 (Decrease) / Increase in current liabilities: Accounts
payable 204,374 (272,030) Other payable (260,826) 245,294 Tax
payable (398,266) 515,789 Accrued expenses 246,022 (38,641) Net
cash provide used in operating activities (3,200,907) (1,819,307)
Cash flows from investing activities: Acquisition of property &
equipment (385,342) (34,811) Restricted Cash 0 43,883 Net cash by
(used in) investing activities (385,342) 9,072 Cash flows from
financing activities: Advance from shareholders -- 1,246 Net cash
provided by financing activities -- 1,246 Net increase in cash and
cash equivalents (3,586,249) (1,808,989) Effect of exchange rate
change on cash and cash equivalents 1,477,718 289,574 Cash and cash
equivalents, beginning of year 11,852,636 6,430,009 Cash and cash
equivalents, end of year $9,744,105 $4,910,594 Supplements
Disclosure of cash flow information: Income Taxes paid $1,093,804
$3,760,570 Non-cash investment and financial activity Offset of
amounts due to/from stockholders $330,985 -- For more information,
please contact: CCG Elite Investor Relations Crocker Coulson,
President Tel: +1-646-213-1915 Email: Web: http://www.ccgelite.com/
China Agritech, Inc. Kelviz Lim Tel: +86-10-5962-1220 DATASOURCE:
China Agritech, Inc. CONTACT: Crocker Coulson, President 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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