China Green Material Technologies, Inc. Reports Second Quarter 2010 Financial Results
HARBIN, China, Aug. 16 /PRNewswire-Asia-FirstCall/ --
-- Q2 2010 revenues increased 26.6% to $4.5 million
-- Q2 2010 gross profit increased 29.1% to $2.2 million with gross margins
of 48.8%
-- 1H Adjusted EPS of $0.06(1) on an additional 6.9M shares(2)
-- 1H10 cash flow from operations $2.6 million
(1) Adjusted net income and adjusted net income per diluted share are
non-GAAP financial measures that are explained in the table at the end
of this press release. The Company uses adjusted net income and
adjusted net income per diluted share to provide information about its
operating trends and the Company's management considers these non-GAAP
financial measures to be important metrics in evaluating the Company's
business. The Company calculates these figures by excluding the impact
of certain non-recurring and non-cash items.
(2) The Company issued common shares during the first and second quarter
of 2010.
China Green Material Technologies, Inc. (OTC Bulletin Board: CAGM; "CAGM" or "the Company"), a Chinese leader in developing and manufacturing starch-based biodegradable containers, tableware and packaging materials, today announced financial results for the second quarter ended June 30, 2010.
Second Quarter 2010:
Revenues - Second quarter revenues increased 26.6% to $4.5 million compared to $3.5 million in the second quarter of 2009. The results reflect growing demand for the Company's products from existing customers, as well as the successful penetration of new customers and new geographic markets.
Gross Profit - Gross profit in the second quarter of 2010 increased 23.9% to $2.2 million compared to $1.8 million in the second quarter of last year, while gross margin was 48.8% versus 49.8% a year ago. The decrease in gross margin was largely due to an increase in amortization expenses of intangible assets and an increase in packaging costs, partly offset by greater efficiencies due to the effects of higher revenues and certain fixed-cost components of the cost of revenues.
Operating Expense - Operating expenses in the second quarter of 2010 totaled $0.9 million, or 20.6% of sales versus $0.3 million, or 7.3% of sales in the second quarter of 2009. Selling expenses were down 42.2% year-over-year, while general and administrative expenses increased to $0.9 million in the second quarter of 2010 compared to $0.2 million in 2009. The $0.7 million increase was due to a 45% increase in overall salary and related costs and stock compensation expenses.
Operating Income - Second quarter income from operations decreased 16.1% to $1.3 million compared to $1.5 million in the 2009 period. Operating margin was 28.2% in the 2010 period versus 42.5% a year ago. Excluding the stock compensation and pre-opening expenses, operating margin was 38.7%, down 3.8% compared to the same period last year.
Other Income (Expense) - Other expenses were $0.1 million in the second quarter of 2010 versus none in the second quarter of 2009.
Net Income - Net income in the second quarter of 2010 was $1.0 compared to $1.3 million in the second quarter of 2009. Adjusted net income (non-GAAP) was $1.5 million, an increase of 24.5% versus a year ago. Net income per diluted share was $0.04 in the second quarter of 2010 versus net income per diluted share of $0.07 in the second quarter of 2009 based on weighted average shares of 24.3 million and 18.7 million, respectively. The increase in share count reflects the issuance of 5.0 million and 1.9 million common shares in private placements completed in the first and second quarters of 2010, respectively. Adjusted net income per diluted share (non-GAAP) was $0.06 in the second quarter of 2010.
The Company's effective tax rate was 16.2% in the second quarter of 2010 versus 15.0% for the same period in 2009.
Mr. Su Zhonghao, Chief Executive Officer of China Green Material Technologies, stated, "The 28% increase in revenues in the first half of 2010 reflects strong demand from new and existing customers in both China and abroad. We are beginning to see the benefits from the investments we have made to acquire intellectual properties, in addition to the expansion of our sales and marketing team which is supporting a broader distribution footprint. With a healthy pipeline of new products and the ability to produce customer orders, we are excited about our ability to become a stronger global competitor in the large and growing biodegradable products market."
First Six Months of 2010:
Revenues - Revenues increased 28.4% in the first six months of 2010 to $7.3 million compared to $5.7 million in the same period of 2009.
Gross Profit - Gross profit in the first half of 2010 increased 23.9% to $3.4 million compared to $2.7 million in the second half of last year, while gross margin decreased 1.7% to 46.2%. Improvements in operating efficiency were more than offset by increased packaging costs and higher levels of amortization of intangible assets. The Company expects to reduce production costs and improve gross margins when its new manufacturing facility comes on line in the second half of this year.
Operating Expense - Operating expenses in the first six months of 2010 totaled $1.2 million, or 16.6% of sales versus $0.5 million, or 8.1% of sales in the first six months of 2009. Selling expenses during the first six months of 2010 were down 25.0% compared to the comparable period of 2009, while general and administrative expenses increased to $1.1 million in the 2010 period compared to $0.3 million in the 2009 period. The $0.8 million increase was due to increases in overall salaries, and professional fees, stock compensation expenses, and pre-opening expenses for our new manufacturing facility.
Operating Income - Income from operations for the first six months of 2010 decreased 4.7% to $2.2 million compared to $2.3 million in the 2009 period. Operating margin was 29.6% in the 2010 period versus 39.9% a year ago. Excluding stock compensation expense, operating margin was 36.1%.
Other Income (Expense) - Other expenses were $0.5 million in the first six months of 2010 while the same year ago period contained negligible expenses.
Net Income - Net income for the first six months of 2010 was $1.4 compared to $1.9 million in the first six months of 2009. Net income per diluted share was $0.06 in the first six months of 2010 versus net income per diluted share of $0.10 in the first six months of 2009 based on weighted average shares of 23.4 million and 18.7 million, respectively. Adjusted net income (non-GAAP) was $2.3 million, an increase of 17.6% versus a year ago. Adjusted net income per diluted share (non-GAAP) was $0.10 for both the first six months of 2010 and the first six months of 2009. The increase in share count reflects the issuance of 6.9 million common shares in private placements completed during the first six months of 2010.
Liquidity and Capital Resources:
As of June 30, 2010, the Company had $10.3 million in cash and cash equivalents, an increase of $3 million from the end of 2009, primarily due to net proceeds from private placements completed during 2010, offset by $4.4 million of cash advances to suppliers of equipment for the new manufacturing facility. Cash flow from operations in for the first six months of 2010 totaled $2.6 million. The Company made progress on improving its accounts receivable turnover, with Days Sales Outstanding decreasing from 187 days in the first quarter to 140 days in the second quarter of 2010. The Company had $15.1 million in working capital and no long-term debt as of June 30, 2010.
"We continue to leverage our intellectual property assets and low-cost manufacturing advantage to develop more products and further expand to new geographies," continued Mr. Su Zhonghao. "We are on track to complete the construction of our new state-of-art manufacturing facility in Harbin, which will not only increase our capacity by 45% to 13,000 tons per annum, but should also improve gross margin across all product lines."
Mr. Su Zhonghao concluded, "Looking ahead, we are focused on two key areas of growth: 1) expanding our presence in China and entering key overseas markets, including the U.S., Italy, France, the U.K., Israel, Korea and Japan; and 2) developing new product categories such as disposable trash bags, shopping bags and medical products. We are especially excited about the long-term opportunity for biodegradable packaging, which is estimated by the International Association of Packaging Research Institutes to surpass $60 billion in total sales during 2010."
About China Green Material Technologies, Inc.
Website: http://www.sinogreenmaterial.com
China Green Material Technologies, Inc. (OTCBB: CAGM) is a China-based manufacturer of starch-based biodegradable containers, tableware and packaging products. Headquartered in Harbin city of China, the Company currently has 153 employees. The Company has developed proprietary biodegradable food packaging materials technologies.
Safe Harbor Statement
This press release contains certain statements that may include 'forward-looking statements' as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects," "anticipate," "optimistic," "intend," "will" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and other factors, including the risk that the Company may not successfully open its planned new production facility in 2010 and those risks and other factors discussed in the Company's periodic reports that are filed with and available from the Securities and Exchange Commission, including the Annual Report on Form 10-K filed April 12, 2010. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
(Unaudited)
Assets
Current Assets:
Cash and equivalents $10,279,530 $7,321,276
Cash - restricted 47,474 3,443
Accounts receivable, net 6,873,164 6,524,510
Inventories 740,987 456,970
Accrued receivables 66,265 549,288
Other receivables 266,958 19,210
Deferred income tax assets 90,921 4,918
Prepaid expenses 53,300 29,434
Other current assets -- 78,863
Total Current Assets 18,418,599 14,987,912
Deposits to suppliers of property and
equipment 4,428,794 --
Property and equipment, net 12,879,161 10,394,584
Intangible assets, net 5,032,177 5,060,559
Know-how right, net 2,116,802 2,160,533
Investment - at cost 17,421 310,419
Total Assets $42,892,954 $32,914,007
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $992,152 $302,786
Customer deposits -- 4,213
Due to stockholders/officers, net 313,346 300,793
Taxes payable 501,735 430,408
Other current liabilities 1,493,125 1,469,121
Total Current Liabilities 3,300,358 2,507,321
Stockholders' Equity
Common stock, $0.001 par value,
100,000,000 shares authorized,
25,629,515 and 18,711,388 shares
issued and outstanding at June 30, 2010
and December 31, 2009, respectively 25,630 18,711
Additional paid-in capital 25,495,900 17,895,324
Reserve funds 1,318,116 1,152,569
Retained earnings 8,923,903 7,709,729
Accumulated other comprehensive income 3,829,047 3,630,353
Total Stockholders' Equity 39,592,596 30,406,686
Total Liabilities and Stockholders' Equity $42,892,954 $32,914,007
The accompanying notes are an integral part of the financial statements.
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
Revenues $4,493,784 $3,549,446 $7,283,182 $5,671,566
Cost of revenues 2,300,315 1,779,453 3,916,105 2,953,284
Gross profit 2,193,469 1,769,993 3,367,077 2,718,282
Operating
Expenses Selling
expenses 44,556 77,127 87,279 116,256
General and
administrative
expenses 882,088 183,337 1,124,849 341,166
Total Operating
Expenses 926,644 260,464 1,212,128 457,422
Income From
Operations 1,266,825 1,509,529 2,154,949 2,260,860
Other income
(expense):
Interest income 1,412 1,327 2,939 1,994
Net rental
income/
(expenses) (28,103) 6,015 (66,030) 12,025
Loss on
investment (96,153) -- (293,251) --
Loss on disposal
of property
and equipment (32) (1,012) (125,689) (1,012)
Other expenses
- net (17,544) (320) (18,220) (456)
Total other
income (expense) (140,420) 6,010 (500,251) 12,551
Income Before
Income Taxes 1,126,405 1,515,539 1,654,698 2,273,411
Provision for
income taxes 181,584 228,124 274,978 342,015
Net Income 944,821 1,287,415 1,379,720 1,931,396
Foreign currency
translation
adjustment 195,224 14,094 198,694 (31,147)
Comprehensive
Income $1,140,045 $1,301,509 $1,578,414 $1,900,249
Net Income Per
Common Share
basic $0.04 $0.07 $0.06 $0.10
diluted $0.04 $0.07 $0.06 $0.10
Weighted Common
Shares
Outstanding
basic 24,037,098 18,733,388 23,230,924 18,733,388
diluted 24,282,098 18,733,388 23,354,101 18,733,388
The accompanying notes are an integral part of the financial statements.
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
Six Months Ended June 30,
2010 2009
Cash flows From Operating Activities:
Net Income $1,379,720 $1,931,396
Adjustments to Reconcile Net Income to
Net Cash
Provided by Operating Activities
Depreciation and amortization 671,836 651,929
Changes in deferred tax (85,546) --
Bad debt expenses 1,568 649
Stock based compensation 471,601 --
Loss on long-term investment 293,251 --
Loss on disposal of fixed assets 125,689 1,012
Changes in operating assets and
liabilities
Accounts receivable (313,947) (118,122)
Inventories (280,176) (140,290)
Accrued receivables 483,509 201
Prepaid expenses and other
receivables (191,109) (87,097)
Other current assets -- (163,427)
Accounts payable and accrued
expenses (96,541) (45,814)
Customer deposits 16,249 890
Taxes payable 68,692 403,077
Other current liabilities 10,909 2,705
Net Cash Provided by Operating Activities 2,555,705 2,437,109
Cash Flows From Investing Activities:
Restricted cash (44,011) --
Advance to suppliers of property
and equipment (4,406,602) --
Purchase of property and
equipment (3,221,890) (63,242)
Proceeds from disposal of fixed
assets 117,214 18,293
Net Cash Used in Investing Activities (7,555,289) (44,949)
Cash Flows From Financing Activities:
Payment to shareholders/officers
loans -- (1,024,787)
Proceeds from shareholders/
officers loans -- 12,344
Advance from third party 776,545 --
Proceeds from stock
issued 7,135,895 --
Net Cash Provided by (Used in) Financing
Activities 7,912,440 (1,012,443)
Effect of Exchange Rate Changes on Cash and
Equivalents 45,398 (6,248)
Net Increase in Cash and Equivalents 2,958,254 1,373,469
Cash and Equivalents at Beginning of Period 7,321,276 4,245,044
Cash and Equivalents at End of Period $10,279,530 $5,618,513
SUPPLEMENT DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for Interest $-- $--
Cash paid for Income taxes $311,895 $--
The accompanying notes are an integral part of the financial statements.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures which Company management uses for financial and operational decision making, and as a means to evaluate period-to-period comparisons. The Company believes that these non- GAAP financial measures are useful to investors because they exclude a loss on the disposal of fixed assets and a loss on long-term investments that our management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of CAGM. Accordingly, management excludes these losses when making operational decisions. The Company believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non- GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides a reconciliation of non-GAAP earnings per share to the equivalent GAAP measure.
3 Months Ended June 30, 2010:
Second Quarter Ended
(in thousands, except per share data) 30-Jun 30-June
2010 2009
Net income $945 $1,287
Loss on investments $96 --
Non-cash stock compensation expense $472
Adjusted net income (non-GAAP) $1,513 $1,287
Adjusted diluted earnings per share (non-GAAP):
Basic $0.063 $0.07
Diluted $0.062 $0.07
6 Months Ended June 30, 2010:
Six Months Ended
(in thousands, except per share data) 30-Jun 30-June
2010 2009
Net income $1,380 $1,931
Loss on disposal of fixed assets $126 --
Loss on investments $293 --
Non-cash stock compensation expense $472 --
Adjusted net income (non-GAAP) $2,271 $1,931
Adjusted diluted earnings per share (non-GAAP):
Basic $0.10 $0.10
Diluted $0.10 $0.10
For more information, please contact:
In China:
Low Yan Seong, CFO
China Green Material Technologies, Inc.
Email: [email protected]
Web: http://www.sinogreenmaterial.com
Feng Peng
HC International, Inc.
Phone: +86-138-12271616
Email: [email protected]
In the U.S.:
Ted Haberfield
HC International, Inc.
Phone: +1-760-755-2716
Email: [email protected]
Web: http://www.hcinternational.net
SOURCE China Green Material Technologies, Inc.
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