BEIJING, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc.
(OTC Bulletin Board: CAGC) (“China Agritech”) one of the largest
manufacturers of liquid organic fertilizer in China, today announced its
financial results for the third quarter of 2006.
Q3 Highlights
-- Revenues increased 32% year over year to $7.6 million
-- Gross margin increased to 52.8% from 44.5% in the third quarter 2005
-- Net income increase 110.6% year over year to $1.1 million
-- New Beijing factory opened with 2,000 metric tons converting capacity
and 5,000 metric tons of concentrate
-- New Anhui factory opened with 2,000 metric tons converting capacity
Revenue for the third quarter 2006 increased 32.0% to $7.6 million, from
$5.8 million in the third quarter 2005. Net income increased to $1.1
million, up 110.6% from $0.5 million. Fully diluted EPS for the quarter was
$0.06 as compared to fully diluted EPS of $0.04 in the third quarter 2005.
Commenting on the quarter, Mr. Yu Chang, Chief Executive Officer of China
Agritech, said, “We are very pleased with the top and bottom line growth we
experienced during the third quarter. Revenues and margins were favorably
impacted by increased shipments of our higher priced Tailong I fertilizer,
which reach 330 tons, up from 37 tons in the third quarter 2005. During the
third quarter, we opened our new factory in Beijing which will serve as our
primary syrup production center for our new markets, with a capacity 5,000
metric tons per year. It also contains a converting factory with 2,000
metric tons capacity and will serve as our research and development center.
We expect to complete construction of two additional converting facilities in
Xinjiang and Chongquing by year end, which will bring our total capacity to
13,000 metric tons, an increase of 160% from the 5,000 metric tons we had at
the beginning of 2006.”
Gross profit for the third quarter 2006 was $4.0 million for an increase
of 56.5% from $2.6 million in the third quarter 2005. Gross margins
increased to 52.8% of sales, up from 44.5% in the third quarter of 2005. The
gross profit for the quarter was favorably impacted by reduced material cost
as a result of improved production cost control measure and increased sales
of higher margin products.
Selling expenses during the quarter were $0.7 million, or 8.9% of
revenue, down from $0.8 million or 13.4% of revenue. The decrease in selling
expenses is the result of reduced advertising expense for the Harbin factory
which more than offset the increased advertising expense for the new Anhui
and Beijing factories.
Operating and administrative expenses for the third quarter 2006 were
$1.1 million, or 14.2% of sales, compared to $0.7 million, or 25.5% of sales
in the third quarter 2005. The increase in operating and administrative
expenses for the quarter is attributed to the start up cost associated with
the new factories and headquarters and accrued certain bad debt allowance.
Income from operations increased 98.0% to $2.2 million, or 29.7% of
sales, from $1.1 million, or 19.8% of sales, in the prior year period.
Operating margins increase increased due to favorable product mix and
improved cost controls.
Third quarter 2006 net income was $1.1 million, up 110.6% from the third
quarter 2005 of $0.5 million. Fully diluted earnings per share were $0.06
for the third quarter 2006, compared to fully diluted earning per share of
$0.04 for the same period a year earlier. In January 2006, the Company
completed a private placement which increased fully diluted shares to 19.1
million shares in the third quarter of 2006 from 14.2 million in the third
quarter of 2005.
Nine Months Results
Revenues for the first nine months of 2006 were $23.5 million, up 12.4%
from $20.9 million in the first nine months of 2005. Gross profit for the
period was $12.2 million, up 24.3% from $9.8 million in the prior year
period. Operating income was $8.0 million, an increase of 49.7% from $5.4
million in the third quarter of 2005. Net income increased 62.2% for the
first nine months of 2006 to $4.2 million, from $2.6 million in the prior
year period. Fully diluted EPS for the period was $0.23, compared to $0.18
for the first nine months of 2005.
Financial Condition
As of September 30, 2006, China Agritech had $8.1 million in cash and
cash equivalents, working capital of $25.3 million and no long-term debt.
Shareholders’ equity stood at $25.7 million, up from $10.0 million as of
December 31, 2005.
Business Outlook
During the fourth quarter, China Agritech intends to complete
construction on its two new factories, in Xinjiang and Chongqing, and has
budgeted about $1.5 million in capital expenditures. As the fourth quarter
is the end of the harvesting season in China Agritech’s current served
markets in the north and northeast of China, the Company does not anticipate
significant revenue contributions from its three newest factories this year.
“We believe that the significant expansion in our production capacity in
2006, will position us very well as we enter the key selling season in the
spring and summer of 2007,” said Mr. Chang. “We are placing significant
management focus on building the regional distribution network to support our
new geographic footprint, which will cover 17 provinces in China, up from
just 12 provinces at the beginning of 2006. We look forward to a strong 2007
with increased penetration in both domestic and international markets.”
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 6:00 pm Eastern Time, on Wednesday
November 15, 2006. To participate in the live conference call, please dial
the following number five to ten minutes prior to the scheduled conference
call time: (866) 800-8648. International callers should dial (617) 614-
2702. When prompted by the operator, mention Conference ID 57355225.
For those unable to participate during the live conference call, an audio
replay of the call will be available at (888) 286-8010 if calling within the
United States, or (617) 801-6888 if calling internationally. Please use
Conference ID 94240086. The playback will be available for 7 days after the
call.
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 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 twelve provinces of China including: Heilongjiang, Hebei,
Liaonong, Jilin, Shandong, Inner Mongolia, Henan, Sichuan, Guangdong,
Xinjiang, Yunnan and Guizhou. For more information visit
http://www.chinaagritechinc.com .
The statements contained in this Release that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including without limitation, statements regarding the Company’s
expectations, hopes, beliefs, intentions or strategies regarding the future.
These
forward-looking statements are based on the Company’s current expectations
and beliefs concerning future developments and their potential effects on the
Company. There can be no assurance that future developments affecting the
Company will be those anticipated by the Company. These forward-looking
statements involve a number of risks, uncertainties (some of which are beyond
the control of the Company) or other assumptions that may cause actual
results or performance to be materially different from those expressed or
implied by such forward-looking statements such as the inability to protect
the proprietary formula, the price of raw materials, any liabilities from
unknown harmful effects of the product, and adverse weather conditions. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise, except as may be required under applicable securities laws.
-- financial tables below --
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2006
(UNAUDITED)
ASSETS
September December
30, 31,
2006 2005
Current Assets
Cash and cash equivalents $ 8,134,284 $ 255,831
Restricted cash 178,345 275,000
Accounts receivable, net 17,259,379 8,525,185
Inventories 907,581 72,827
Advances to suppliers 1,466,190 2,076,252
Prepayments and other receivables 238,379 376,064
Total Current Assets 28,184,158 11,581,159
Property, plant and equipment, net 2,271,006 1,065,146
Total Assets $ 30,455,164 $ 12,646,305
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 1,030,396 $ 115,024
Accrued liabilities and other payables 669,672 616,363
Amount due to a director 20,588 56,702
Income taxes payable 1,114,539 562,355
Total Current Liabilities 2,835,195 1,350,444
Minority Interests 1,918,852 1,237,910
Commitments
Stockholders’ Equity
Common stocks; $0.001 par value,
100,000,000 shares authorized,
19,143,615 shares issued and
outstanding 19,144 14,344
Additional paid-in capital 12,618,531 1,547,741
Statutory reserves 2,500,627 1,731,067
Accumulated other comprehensive income 595,890 228,566
Retained earnings 9,966,925 6,536,233
Total Stockholders’ Equity 25,701,117 10,057,951
Total Liabilities and Stockholders’
Equity $ 30,455,164 $ 12,646,305
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
Three month periods ended Nine month periods ended
September 30, September 30,
2006 2005 2006 2005
Net revenue $7,601,819 $5,760,407 $23,522,609 $20,930,453
Cost of revenue (3,589,872) (3,197,088) (11,307,639) (11,106,705)
Gross profit 4,011,947 2,563,319 12,214,970 9,823,748
Operating expenses
Selling expenses (679,211) (771,690) (1,840,740) (2,150,488)
Operating and
administrative expenses (1,076,929) (652,407) (2,286,372) (2,272,042)
Total operating expenses (1,756,140) (1,424,097) (4,127,112) (4,422,530)
Income from operations 2,255,807 1,139,222 8,087,858 5,401,218
Other income (expense)
Other (expense) income (6,854) 51 (39,143) 65
Finance costs (11,654) (410) (1,813) (412)
Total other expenses (18,508) (359) (40,956) (347)
Income before income
taxes 2,237,299 1,138,863 8,046,902 5,400,871
Provision for income
taxes (938,523) (493,846) (3,188,858) (2,331,309)
Income before minority
interests 1,298,776 645,017 4,858,044 3,069,562
Minority interests (190,550) (119,542) (647,688) (473,326)
Net income 1,108,226 525,475 4,210,356 2,596,236
Other comprehensive
income
Foreign currency
translation adjustment 455,463 -- 367,329 --
Comprehensive income $1,563,689 $525,475 $4,577,685 $2,596,236
Basic weighted average
shares outstanding 19,143,615 14,238,657 18,614,203 14,093,114
Basic aet earnings per
share $0.06 $0.04 $0.23 $0.18
Diluted weighted average
shares outstanding 19,143,615 14,238,657 18,614,203 14,093,114
Diluted net earnings per
share $0.06 $0.04 $0.23 $0.18
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
Cash flows from operating
activities
Net income $ 4,210,356 $ 2,596,236
Adjustment to reconcile net income
to net cash used in
operating activities:
Minority interests 647,688 473,326
Stock compensation expenses 2,398 --
Depreciation 90,471 49,767
Changes in operating assets and
liabilities:
(Increase) decrease in current
assets
Due from shareholders (439,351) (23,234)
Advance/repayment from related
parties (162,996) (33,662)
Accounts receivable, net (8,454,017) (5,950,513)
Restricted cash 95,598 --
Prepayment and other receivable 139,423 (22,328)
Inventories (822,746) 64,355
Advances to suppliers 643,490 --
(Decrease) increase in:
Accounts payable 1,450,674 2,226,871
Accrued liabilities and other
payables 130,554 394,276
Income tax payable 458,853 152,607
Due to shareholders -- (499,031)
Due to related parties -- (575,994)
Net cash used in operating
activities (2,009,605) (1,147,324)
Cash flows from investing
activities
Cash acquired from reverse
acquisition of Tailong -- 185,635
Purchase of property, plant and
equipment (1,267,032) (528)
Net cash provided by (used in)
investing activities (1,267,032) 185,107
Cash flows from financing
activities
Capital contributed 11,081,575 1,350,000
