* Revenue increases 52% to $8.6 million
* Net income increases 86% to $1.9 million
BEIJING, China, May 18 /Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc. (OTC Bulletin Board: CAGC) ("China Agritech"), a leading manufacturer of liquid organic fertilizer in China, today announced its financial results for the first quarter ended March 31, 2007.
First Quarter Highlights
-- Revenue increased 52% year-over-year to $8.6 million
-- Newly established distribution network channel contributed 11% to first
quarter revenues
-- Net income increased 86% year-over-year to $1.9 million
First Quarter 2007 Results
Revenue for the first quarter 2007 increased 51.5% to $8.6 million, from $5.7 million in the first quarter 2006. The increase in revenue for the quarter was attributed to the sales of China Agritech's new products - Green Vitality and Lulingbao IV which were not produced in the same period of 2006. Net income increased to $1.9 million, up 85.8% from the first quarter of 2006. Fully diluted earnings per share for the quarter were $0.10, compared to fully diluted earnings per share of $0.05 in the first quarter 2006. The number of diluted weighted average shares outstanding was 19.1 million in the first quarter of 2007, compared to 18.5 million in the first quarter of 2006.
Commenting on the first quarter of 2007, Mr. Yu Chang, Chief Executive Officer of China Agritech, said, "We are excited with both our top and bottom line growth during the first quarter. We have dedicated the last year to building out our capacity and establishing our distribution network and we are pleased to finally see results from these efforts. Our new facilities in Beijing and Anhui contributed to our revenue with the production of Green Vitality. We have also recently finished the test-running of the production process at our Chongqing factory and are now in full production. Our fourth converting facility in Xinjiang is expected to come online in the second quarter of 2007."
During the quarter, China Agritech successfully expanded its market penetration to include the central and southern regions of China. The company sold 152 metric tons of its Green Vitality fertilizer produced from its Beijing and Anhui factories in these new regions which contributed 11% to total revenue during the first quarter of 2007.
Gross profit for the first quarter 2007 was $4.5 million, up 60.0% from $2.8 million in the first quarter 2006. Gross margin was 52.4%, compared to 49.6% in the same period a year earlier. Gross margin in the first quarter 2007 was favorably impacted by reduced material costs as a result of improved production cost control measures as well as increased sales of higher margin products.
Selling expenses during the quarter were $0.6 million, or 7.1% of revenue compared to $0.5 million, or 8.3% of revenue, in the comparable quarter in 2006. The decline in selling expense as a percent of revenue is attributable to the company's rate of revenue increase being greater than rate of selling expenses increase.
Administrative expenses during the quarter were $0.5 million, or 6.4% of revenue, compared to $0.4 million or 7.2% of revenue in the same period of 2006. The percentage decrease was positively impacted by more efficient cost controls of administrative expenses.
Income from operations was $3.3 million, up 73.1% from $1.9 million in the same period of 2006. Operating margin for the quarter was 38.9% compared to 34.0% in the first quarter of 2006. The increase in operating margin was due to a combination of improved operating efficiencies and higher gross margin during the first quarter of 2007.
First quarter of 2007 net income was $1.9 million, up 85.8% from $1.0 million in the first quarter of 2006. Fully diluted earnings per share were $0.10 for the first quarter 2007, compared to fully diluted earnings per share of $0.05 for the same period a year earlier.
Financial Condition
As of March 31, 2007, China Agritech had $5.0 million in cash, restricted cash and cash equivalents, working capital of $29.2 million and no long-term debt. Days sales outstanding for the first quarter 2007 was 160 days. Shareholders' equity stood at $29.2 million, up from $26.9 million as of December 31, 2006.
Business Outlook
The peak selling time for China Agritech's fertilizer is during the agricultural growing season which has just begun in China. Moreover, the company is in the early stages of expanding its market penetration from the northern region to include the central and southern regions of China. The increased market penetration is supported by a multi-tier distribution system which is expected to contribute to revenue growth for the rest of 2007. China Agritech is building its fourth new factory located in Xinjiang, which it expects to put into production in late May, 2007. The company has budgeted $1 million in capital expenditures for this factory. China Agritech year-end guidance for 2007 in the range of $46.0 and $48.0 million in revenues and net income in the range of $8.4 and $8.6 million.
"We have started off the beginning of our peak selling season with strong results which we expect will continue through the rest of the season. We have shown progress in our ability to penetrate the southern and central regions of China which significantly expands our customer base. Our distribution network is fully established at the village level which is a key component in supporting our expansion as we build a national brand in liquid organic compound fertilizer. We also expect to see results in penetrating international markets during the second half of this year," concluded Mr. Chang.
Conference Call Information
Management will conduct a conference call to discuss China Agritech's first quarter financial results and provide a corporate overview. The conference call will take place at 9:00 a.m. Eastern Time, on Friday, May 18, 2007. 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 30478473.
If you are unable to participate in the call at this time, a replay will be available on Friday, May 18, 2007 at 11:00 a.m. ET, through Friday, May 25, 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 20941076.
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 SHEETS
MARCH 31, DECEMBER 31,
2007 2006
(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents $ 4,910,594 $ 6,430,009
Restricted cash 56,149 100,028
Accounts receivable, net 18,338,613 12,239,073
Inventories 2,852,716 1,322,244
Advances to suppliers 5,300,016 8,038,974
Prepayments and other receivables 386,673 382,463
Total Current Assets 31,844,760 28,512,791
Property, plant and equipment, net 2,467,794 2,514,123
Total Assets $ 34,312,554 $ 31,026,914
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 93,016 $ 108,886
Accrued liabilities and other
payables 997,865 871,495
Amount due to related parties 1,191 954
Income tax payable 1,557,786 1,028,885
Total Current Liabilities 2,649,858 2,010,220
Minority Interests 2,415,601 2,160,575
Commitments -- --
Stockholders' Equity
Common stocks; $0.001 par value,
100,000,000 shares authorized,
19,143,615 shares issued and
outstanding 19,144 19,144
Additional paid in capital 12,620,248 12,619,049
Statutory reserve 3,103,240 2,790,916
Accumulated other comprehensive
income 1,105,936 601,288
Retained earnings 12,398,526 10,825,722
Total Stockholders' Equity 29,247,095 26,856,119
Total Liabilities and
Stockholders' Equity $ 34,312,554 $ 31,026,914
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
MARCH 31,
2007 2006
(UNAUDITED) (UNAUDITED)
Net revenue $ 8,611,741 $ 5,685,397
Cost of revenue (4,100,825) (2,865,315)
Gross profit 4,510,916 2,820,082
Operating expenses
Selling expenses (614,002) (473,508)
Operating and
administrative
expenses (548,067) (411,465)
Total operating
expenses (1,162,069) (884,973)
Income from operations 3,348,847 1,935,109
Other income (expense)
Other (expense) income 27,896 (6,110)
Finance income
(expense) (209) 119
Total other income
(expense) 27,687 (5,991)
Income before income
taxes and
minority interest 3,376,534 1,929,118
Provision for income
taxes (1,260,055) (768,041)
Income before minority
interests 2,116,479 1,161,077
Minority interests (231,351) (146,749)
Net income 1,885,128 1,014,328
Other comprehensive
income
Foreign currency
translation
adjustment 504,648 74,292
Comprehensive income $ 2,389,776 $ 1,088,620
Basic and diluted
weighted
average shares
outstanding 19,143,615 18,503,615
Basic and diluted net
earnings
per share $ 0.10 $ 0.05
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
March 31,
2007 2006
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income $ 1,885,128 $ 1,014,328
Adjustments to reconcile net income to net
cash used in operating activities:
Stock based compensation 1,199 --
Minority Interest 231,351 146,749
Depreciation 81,140 25,420
(Increase) Decrease in current assets:
Accounts receivable (5,944,426) (2,524,073)
Prepayment and other receivable 6,016 (1,385,464)
Inventory (1,340,544) (540,650)
Advances to suppliers 2,810,417 417,611
Increase (Decrease) in current liabilities:
Accounts payable (272,030) 909,967
Other payable 245,294 --
Tax payable 515,789 290,525
Accrued expenses (38,641) (9,303)
Net cash used in operating activities (1,819,308) (1,654,890)
Cash flows from investing activities:
Acquisition of property & equipment (34,811) (175,668)
Restricted cash 43,883 --
Net cash provided by (used in) investing
activities 9,072 (175,668)
Cash flows from financing activities:
Advance/repayment from/to related parties -- (51,251)
Advance from shareholders 1,246 --
Capital contributed -- 11,019,849
Net cash provided by financing activities 1,246 10,968,598
Net increase (decrease) in cash and cash
equivalents (1,808,989) 9,138,040
Effect of exchange rate change on cash and cash
equivalents 289,574 66,436
Cash and cash equivalents, beginning of year 6,430,009 255,831
Cash and cash equivalents, end of year $ 4,910,594 $ 9,460,307
Supplement disclosure of cash flow
information:
Interest expense paid $ -- $ 12
Income taxes paid $ 3,760,570 $ 565,712
For more information, please contact:
CCG Elite Investor Relations
Crocker Coulson, President, or
Leslie Richardson, Financial Writer
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
China Agritech, Inc.
Yvonne Zhang
Tel: +86-10-5870-2280
