BEIJING, Aug. 15 /Xinhua-PRNewswire/ -- 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 second quarter of 2006.
Q2 Highlights
-- Revenues of $10.2 million, in line with Q2 2005
-- Gross margins increased to 52.6% from 45.6% year-over-year
-- Operating income increased 22.9% year-over-year to $3.9 million
-- Net income increased 12.9% to $2.1 million year-over-year
Revenues for the second quarter 2006 were $10.2 million, unchanged from
the second quarter 2005, and up 80% from $5.7 million in the first quarter
of 2006. The increase in revenues from first quarter 2006 is due to the
seasonality of fertilizer sales which are strongest in the second quarter
because of the large number of farmers planting crops. As such, the Harbin
factory was operating near maximum capacity during the quarter. Net income
increased to $2.1 million, or $0.11 per fully diluted share, compared to
$1.8 million, or $0.13 per fully diluted share, in the prior year period.
Diluted earnings per share in the current quarter reflect an additional
4,800,000 shares of common stock from the private placement in January
2006.
Commenting on the quarter, Mr. Yu Chang, Chief Executive Officer of
China Agritech, said, ''The increase in both our gross margin and operating
margin was due to implementing production cost controls which resulted in
our strong net income growth for the quarter. Revenue growth was minimal
due to capacity limits in our Harbin manufacturing facilities, but
reflected continued strong demand for China Agritech's compound liquid
fertilizer products. We recently opened a new factory in Anhui, our Beijing
factory will be completed in September and we expect to have two more
factories completed soon afterwards, which will significantly expand our
manufacturing capacity and effective geographic reach by the end of the
year.''
Demand for China Agritech's products were supported by a continued
shift towards organic fertilizers in order to improve food production and
quality and reduce the negative impact on China's arable land attributable
to overuse of chemical fertilizers. Revenues were strongest in the
Northeast China region at 82.8% of total revenues. Revenues derived from
Central and Southern China grew to 17.2%, an increase from 14.2% for the
second quarter 2005, reflecting the increased penetration in the area.
Gross profit for the second quarter of 2006 was $5.4 million, an
increase of 15.9% over gross profit in the second quarter of 2005 of $4.6
million. Gross margin continued to improve at 52.6% for the quarter,
compared to 45.6% for the same period in 2005. The increase in gross margin
is the result of reduced cost of raw material from improved production cost
control measures, as well as reduced outsourcing of packaging as compared
to same period 2005.
For the quarter, selling expenses were $0.7 million, or 6.7% of
revenues, as compared to $1.0 million, or 9.9% of revenues, in the
comparable quarter last year. The decrease in the percentage of selling
expense to revenues is due to reduced traveling expenses and advertising
expenses in areas where the market is mature.
General and administrative (G&A) expenses for the second quarter were
$0.8 million or 7.8% of revenues, as compared to $0.5 million, or 4.5% of
revenues for the comparable quarter. The increase in G&A is primarily
attributable to the start up costs associated with the Company's new branch
offices.
Operating income increased to $3.9 million, or 38.1% of revenues, up
22.9% from $3.2 million, or 31.1% of revenues in the second quarter of
2005. The increase in operating income is the result of management's
ability to reduce costs of goods sold and selling expenses.
Net income for the quarter increased 12.9% to $2.1 million, compared to
$1.8 million for the three months ended June 30, 2006. Diluted earnings per
share were $0.11 for the second quarter 2006, down 15.4% from diluted
earning per share of $0.13 for the same period a year earlier.
Six Months Results
Revenues for the first half of 2006 increased 4.9% to $15.9 million,
compared to $15.2 million in the same period last year. Gross profit was
$8.2 million, up 13.0% from $7.3 million in the first half of 2005.
Operating income was $5.8 million, up 36.8% from $4.3 million from the same
period a year earlier. Net income increased 49.8% to $3.1 million, compared
to $2.1 million in the first half of 2005. Diluted earnings per share were
$0.17 for the first half of 2006, up 13.3% from $0.15 for the same period
last year.
Financial Condition
As of June 30, 2006, China Agritech had $8.6 million in cash and cash
equivalents, $24.4 million in working capital, and no long-term debt.
Shareholders' equity stood at $24.4 million, up from $10.0 million at year
end 2005.
Business outlook
China Agritech is expanding its distribution network, especially in
Western, Central and Southern China. Its strategy is to increase customers
by building factories close to the farmers who use its products. The
Company has recently begun production at its first new facility in Anhui,
adding 2,000 metric tons to capacity. The Beijing factory is to be
completed in September and two additional facilities, located in Xinjiang
and Chongqing, are to be opened soon afterwards, each of which will add
2,000 metric tons to capacity once fully operational.
''The market opportunity for liquid organic compounds continues to
expand as farmers discover the numerous benefits of higher quality crop
yield and premium pricing for organic produce. We intend to capture this
increasing demand and have developed a three-year expansion strategy.
During the second quarter, we made the first steps in executing our
strategy of building ten factories, adding fifteen new distributors, and
penetrating international markets,'' said Yu Chang. ''By the end of 2006,
we expect to have manufacturing capacity of 13,000 metric tons, which will
provide a solid foundation for our planned expansion into promising new
markets in China and overseas.''
Conference Call Information
Management will conduct a conference call to discuss China Agritech's
second quarter financial results and provide a corporate overview. The
conference call will take place at 9:00 am Eastern Time, on Wednesday
August 16, 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 37700758.
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 37700758. 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.
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
Three-month period ended Six-month period ended
June 30, June 30,
2006 2005 2006 2005
Net Revenue $10,235,393 $10,184,925 $15,920,790 $15,170,045
Cost of revenue (4,852,452) (5,542,015) (7,717,767) (7,909,617)
Gross profit 5,382,941 4,642,910 8,203,023 7,260,428
Operating expenses
Selling expenses (688,021) (1,011,984) (1,161,529) (1,378,798)
Operating and
administrative
expenses (797,978) (461,298) (1,209,443) (1,619,635)
Total operating
expenses (1,485,999) (1,473,282) (2,370,972) (2,998,433)
Income from operations 3,896,942 3,169,628 5,832,051 4,261,995
Other income (expense)
Merger costs -- -- -- --
Other (expense) income (26,179) 6 (32,289) 14
Finance costs 9,722 -- 9,841 (2)
Total other income
(expense) (16,457) 6 (22,448) 12
Income before income
taxes 3,880,485 3,169,634 5,809,603 4,262,007
Provision for income
taxes (1,482,294 (1,113,788) (2,250,335) (1,837,463)
Income before minority
interests 2,398,191 2,055,846 3,559,268 2,424,544
Minority interests (310,389) (206,856) (457,138) (353,784)
Net income 2,087,802 1,848,990 3,102,130 2,070,760
Other comprehensive
income
Foreign currency
Translation adjustment 70,635 -- 140,427 --
Comprehensive income $2,158,437 $1,848,990 $3,242,557 $2,070,760
Basic weighted average
Shares outstanding 19,143,61 14,108,099 18,343,615 13,985,405
Basic net earnings per
share 0.11 0.13 0.17 0.15
Diluted weighted
average shares
outstanding 19,144,301 14,108,099 18,343,806 13,985,405
Diluted net earnings
per share 0.11 0.13 0.17 0.15
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2006
(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents $8,410,408
Restricted Cash 219,755
Accounts receivable, net 13,972,862
Inventories 787,667
Advances to suppliers 1,898,115
Prepayments and other receivables 1,616,193
Amount due a related party 117,130
Total Current Assets 27,022,130
Property, plant and equipment, net 1,679,532
Total Assets $28,701,662
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $486,421
Accrued liabilities and other payables 545,709
Income taxes payable 1,599,181
Total Current Liabilities 2,631,311
Minority Interests 1,707,944
Stockholders' Equity
Common stocks; $0.001 par value, 100,000,000
shares authorized, 19,143,615 shares issued
and outstanding 19,144
Additional paid-in capital 12,619,054
Statutory reserves 2,239,833
Accumulated other comprehensive income 368,993
Retained earnings 9,115,383
Total Stockholders' Equity 24,362,407
Total Liabilities and Stockholders' Equity $28,701,662
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
2006 2005
Cash flows from operating activities
Net income $ 3,102,130 2,070,760
Adjustment to reconcile net income to net
cash provided (used in) by
operating activities:
Stock compensation expenses 1.817 --
Minority interest 457,138 353,784
Depreciation 54,776 49,767
Changes in operating assets and
liabilities:
(Increase) decrease in: current
assets
Due from shareholders (130,616) (234,656)
Advance/repayment from/to related
parties (57,956) (530)
Accounts receivable, net (5,349,097) (6,164,333)
Prepayment and other receivable (1,243,333) (43,356)
Inventories (711,048) (1,121,435)
Advances to suppliers 195,504 --
(Decrease) increase in:
Accounts payable 368,752 5,311,286
Accrued liabilities and other
payables (2,687) 878,149
Income tax payable 955,269 649,597
Due to shareholders -- (499,031)
Due to related parties -- (575,994)
Net cash provided by (used in)
operating activities (2,359,351) 674,008
Cash flows from investing activities
Cash acquired from reverse acquisition
of Tailong -- 185,635
Purchase of property, plant and
equipment (657,138) (528)
Net cash provided by (used in)
investing activities (657,138) 185,107
Cash flows from financing activities
Capital contributed 11,079,705
Net cash provided by financing
activities 11,079,705
For more information, please contact:
CCG Elite Investor Relations
Crocker Coulson, President
Tel: +1-310-231-8600 x103
Email: Crocker.coulson@ccgir.com
China Agritech, Inc.
Richard Dean, U.S. Representative
Tel: +1-716-626-3535
Email: rick@heritagemgmt.net
SOURCE China Agritech, Inc.
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Related links:
http://www.chinaagritechinc.com
CONTACT:
CCG Elite Investor Relations - Crocker
Coulson, President, +1-310-231-8600 x103, or
Crocker.coulson@ccgir.com; China Agritech, Inc., Richard Dean,
U.S. Representative, +1-716-626-3535, or rick@heritagemgmt.net
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