China Advanced Construction Materials Group, Inc. (NASDAQ: CADC)
("China ACM"), a leading provider of ready-mix concrete and related
technical services in China, today announced its financial results
for the Fiscal Year 2011 first quarter ended September 30, 2010.
The Company will host a conference call to discuss the results
today at 10:00 a.m. Eastern, 7:00 a.m. Pacific; details are
provided below.
First Quarter FY 2011 Financial Highlights
-- Revenue increased 59% year over year to $31.0 million
-- Gross margin at 13.33%
-- Non-GAAP adjusted net income available to common shareholders up 35%
YOY to $3.3 million
-- Non-GAAP adjusted fully diluted EPS to common shareholders at $0.19
Management Commentary
Mr. Xianfu Han, Chairman and Chief Executive Officer of China
ACM, commented, "Fiscal Year 2011 is off to an excellent start as
we announced HSR contracts worth $12 million, and have increased
our total number of portable plants from 16 to 23 at a net cost of
only $4.6 million. Six of these new plants are not yet committed. I
am confident we will contract them shortly and place them into
production in the second half boosting Manufacturing Services
revenue. Additionally, by recently raising RMC prices in Concrete
Sales, we target total Company revenues and earnings to be at
solidly record levels in the second half of the fiscal year.
"Also, in the first quarter we raised $10.5 million in debt
financing at 5.8 percent which, combined with strong cash flow,
will fund a higher level of operations and growth.
"China ACM's patented RMC blends and expert, flexible and
reliable technical and engineering services gain increasing respect
and demand in our industry and our industry leadership position is
strengthening," Mr. Han added. "We are continuing to build
relationships with our key State Owned Enterprise (SOE) primary
contractor clients for HSR and other infrastructure projects, which
reinforces barriers to entry and provides us greater pricing power.
Our strong market position enables China ACM to choose those
projects offering the best pricing, location, contract expansion
potential and strategic value."
Commenting on the quarter's results and outlook for Fiscal Year
2011, China ACM President and Chief Financial Officer Jeremy
Goodwin, said, "Operationally, the first quarter of Fiscal Year
2011 was highlighted by rapidly increasing sales, higher capacity
and growing new business opportunities. The start up of an
unusually high number of new long term HSR contracts is quite
positive, so despite a dip in first quarter margins from portable
plant redeployment and start ups, the outlook for the 2011 fiscal
year is robust and on track. We generated $4.93 million in EBITDA
and finished the quarter with $28.8 million in working capital.
"The first quarter reflected a large number of new HSR portable
plant start ups in ramp-up stage as well as an unusually high
number of plants in redeployment transition whose downtime was
lengthened due to a client SOE contractor's local permit issue.
While start dates were delayed, those newly contracted projects
will require the same number of cubic meters of the Company's
premium RMC to be delivered by the originally scheduled project
completion date, so that full revenue is expected to be realized
subsequently.
"Concrete Sales in the quarter were impacted by higher commodity
raw materials costs that increased our overall cost of goods by
about two percent. As many of our Concrete Sales fixed-price
contracts signed prior to the material cost increase have ended or
will soon be ending, the price raise we announced today averaging
25 percent across the range of our concrete sales products is
expected to boost margins back to normal levels in our second
quarter. Our Manufacturing Services portable plants are unaffected
by raw material costs as the client provides the raw materials.
"Additionally, two of our high margin consulting contracts in
the Technical Services business expired. This Segment has been
trending higher in recent years but has been highly variable, and
the Company will be selectively pursuing more such contracts in our
target markets around the country to replace and grow this
business.
"Driven by modernization and urbanization, our addressable
markets, infrastructure, continue to accelerate in growth --
unaffected by China's import/export markets. According to the
Investment Research Institute of China's State Development and
Reform Commission, during the 12th 5-year plan from 2011-2015 the
Chinese Government will invest $450 billion in railway plus another
$460 billion in rural infrastructure which plays to our strength in
commercial and industrial real estate, utilities, airports rail and
subway stations.
"Our diversified backlog and new business pipeline are strong,
near record levels at $58 million and $31 million respectively.
Given our increasing capacity, they support the outlook for a
record year," Mr. Goodwin concluded.
China ACM reported first quarter Fiscal Year 2011 non-GAAP
adjusted net income available to common shareholders increased 35
percent, year over year, to $3.3 million on 59 percent higher
revenue of $31.0 million. The non-GAAP adjusted net income
available to common shareholders is before non-cash change in fair
value of warrants, option and equity-based compensation.
First quarter Manufacturing Services revenue increased by 59
percent to a record $4.5 million year over year with a 28.1 percent
gross margin. Technical Services revenue decreased by 7 percent to
$1.2 million with a 91 percent gross margin. Concrete Sales revenue
at our fixed plants in Beijing increased by 70 percent to $25.3
million with a gross margin of 7.2 percent.
The Company's first quarter blended gross margin was 13.3
percent, declining from 16.9 percent a year ago temporarily
reflecting portable plant projects completion ramp down, relocation
delays and new portable plant projects ramp up, higher seasonal
concrete sales raw material costs as well as higher margin
Technical Services contracts expiring.
Backlog
China ACM reported that, on September 30, its backlog, or bids
in house, was $58 million, 82% of which is contracted with
Government State Owned Enterprise contractors and 12% contracted
with private sector developers. This is comprised of $33 million in
contracted unfilled orders for its Concrete Sales segment, and $25
million in contracted unfilled order for its Manufacturing Services
segment. Based on its historical experience, the Company's
estimated time to convert these contracted orders into recognized
revenues averages is between six and twelve months for Concrete
Sales, and 12 to 30 months for Manufacturing Services depending on
the scope of the project.
The Company's new business pipeline, or bids outstanding, which
is a measure of the value of bids it has submitted for either
Concrete Sales and Manufacturing Services business, was $16 million
and $15 million, respectively, or $31 million total.
Market Opportunity
The China Ministry of Rail has announced its plans to invest
$120.75 billion in 70 new projects upgrading rail infrastructure in
calendar 2010 which together with future planned rail
infrastructure investment will total $730 billion by 2020. China's
State Development and Reform Commission recently announced plans to
expand China's subway system to 6,100 KM investing $105 billion
through 2020.
According to a recent article in The Journal of Commerce,
infrastructure spending in Asia (not including Japan) could total
roughly $1.4 trillion in the next two years, with China committing
$585 billion or more. India is also projected to spend more than
$500 billion by 2015. China is already at work on 12 major highway
projects connecting rural areas to urban centers, which will give
the country 53,000 miles of highways by 2020.
China is also in the midst of a $200 billion campaign to expand
its railways and freight-handling facilities, and plans to build 97
new airports by 2020, including 10 with the capacity to handle more
than 30 million passengers per year. All told, China is expected to
account for more than 28 percent of global infrastructure spending
totaling $70 trillion over the next two decades, reports CG/LA
Infrastructure LLC, a Washington-based consulting firm for the
construction industry.
FY 2011 First Quarter Results
Revenue. We generated first quarter Fiscal Year 2011 revenue of
$30.9 million compared to $19.5 million during the same period of
Fiscal Year 2010, an increase of $11.4 million, or 59%. We
increased our production volumes in and outside of Beijing in this
fiscal year's first quarter as compared to the same period last
fiscal year.
Our concrete sales revenue was $25.3 million for the first
quarter ended September 30, 2010, an increase of $10.4 million or
70%. The increase in revenues attributable to concrete sales was
principally due to the addition of two new fixed plants as well as
a broader client base.
During the first quarter ended September 30, 2010, we continued
to supply concrete products to ten railway projects throughout
China through our portable plants, specifically the projects
located in Shaanxi Province, Jiangsu Province, Hebei Province,
Guangxi Province, Zhejiang Province, Guangdong Province, Liaoning
Province, and Anhui Province. These ten projects contributed $4.5
million to our total revenue for the quarter, an increase of $1.7
million, or 59%, compared to the year ago quarter. The increase in
revenues attributable to our manufacturing services was principally
due to addition of eleven new portable plants to service a growing
business pipeline.
In addition, revenue generated through our technical consulting
services was $1.2 million during the first quarter ended September
30, 2010, a decrease of 7% as compared to the same fiscal quarter
in 2009. The decrease is due to the expiration of two technically
serviced plants in Beijing.
Gross Profit was $4.1 million for the first quarter ended
September 30, 2010, as compared to $3.3 million for the first
quarter ended September 30, 2009. Our gross profit for sale of
concrete was $1.8 million, or 7.2% of revenue, for the quarter,
compared to $0.5 million, or 3.6% of revenue, for the same period
last year, an increase of $1.3 million. The higher gross margin for
concrete sales for the first quarter ended September 30, 2010,
compared with the same period in 2009, reflects higher demand and
higher prices for our concrete products in Beijing as compared to
the same period last year.
Selling, General and Administrative expenses were $2.2 million
for the three months ended September 30, 2010, an increase of $1.3
million or 145%, as compared to $0.9 million for the three months
ended September 30, 2009. The increase was principally due to an
increase in employment, salary and benefit and lease expenses
resulting from higher production and a larger base of operations
during the year, and professional and consulting expenses from
being a public company and resulting from our overall production
expansion during the year.
Net Income available to Common shareholders. Excluding the
effect from non-cash charges related to changes in fair market of
warrants, and stock and option-based compensation, our net income
available to Common shareholders would be $3.3 million for the
three months ended September 30, 2010, an increase of $0.9 million
or 35%, as compared to net income after cash dividends paid of $2.5
million for the same period in 2009.
Balance Sheet Overview
China ACM had working capital of $28.8 million at September 30,
2010, including $12.7 million cash. Shareholders' equity was $65.7
million compared with $61.2 million on June 30, 2010. The total
number of shares outstanding as of November 15, 2010 is
17,602,104.
Conference Call
The company will host a corresponding conference call with a
live webcast and a full Q&A session today at 10:00 a.m. Eastern
time/7:00 a.m. Pacific time, to discuss these results and answer
questions.
Individuals interested in participating in the conference call
may do so by dialing 877-477-1461 from the United States, or
973-409-9694 from outside the United States and referencing
conference ID #23972832. Those interested in listening to the
conference call live via the Internet may do so by visiting the
Investor Relations section of the Company's Web site at
www.china-acm.com. Please visit the website at least 15 minutes
early to register for the web cast and download any necessary audio
software.
A telephone replay will be available through November 29, 2010,
by dialing 800-642-1687 from the United States, or 706-645-9291
from outside the United States, and entering conference ID
#23972832. A webcast replay will be available for 90 days.
About China ACM
China ACM is a leading producer of advanced, certified
eco-friendly ready-mix concrete (RMC) and related technical
services for large scale, high-speed rail (HSR) and other complex
infrastructure projects. Leveraging its proprietary technology and
value-add engineering services model, the Company has won work on
numerous high profile projects including the 30,000 km China HSR
expansion, the Olympic Stadium Birds' Nest, Beijing South Railway
Station, Beijing International Airport, National Centre for
Performing Arts, CCTV Headquarters, Beijing Yintai Building and
U.S. and French embassies.
Founded in 2002, Beijing-based China ACM provides its materials
and services through its network of fixed ready-mix concrete plants
covering the Beijing metropolitan area. It also has technical
services and preferred procurement agreements with other
independently-owned plants across China. Additionally, the Company
owns numerous portable plants deployed in various provinces across
China. More information about the Company is available at
www.china-acm.com.
Use of Non-GAAP Financial Measures
Three Months Ended
---------------------------------------------
September 30,
------------------------------- ------------
Increase
2010 2009 (Decrease)
------------ ------------ ------------
Net Income (Loss) -- GAAP $ 3,308,321 $ (4,522,937) $ 7,831,258
Subtract:
Dividends and accretion on
redeemable convertible
preferred stock $ 0 $ 340,864 $ (340,864)
------------ ------------ ------------
Net Income available to
Common shareholders -- GAAP $ 3,308,321 $ (4,863,801) $ 8,172,122
------------ ------------ ------------
Add Back (Subtract):
Change in fair value of
warrants $ (154,258) $ 7,273,441 $ (7,427,699)
------------ ------------ ------------
Add Back:
Change in Option and
Equity Based
Compensation $ 178,302 $ 60,155 $ 118,147
------------ ------------ ------------
Adjusted Net Income
available to Common
shareholders -- non-GAAP $ 3,332,365 $ 2,469,795 $ 862,570
------------ ------------ ------------
Basic earnings per share --
GAAP $ 0.19 $ (0.44) $ 0.63
Add back (Subtract):
Change in fair value of
warrant $ 0.01 $ 0.66 $ (0.67)
------------ ------------ ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.01 $ 0.01 $ -
------------ ------------ ------------
Adjusted basic earnings per
share non-GAAP $ 0.19 $ 0.23 $ (0.04)
------------ ------------ ------------
Diluted earnings per
share-GAAP $ 0.18 $ (0.44) $ 0.62
Add back (Subtract):
Change in fair value of
warrant $ (0.01) (a) $ 0.66 $ (0.67)
------------ ------------ ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.01 (b) $ 0.01 $ -
------------ ------------ ------------
Adjusted diluted earnings
per share non-GAAP $ 0.19 $ 0.23 $ (0.04)
------------ ------------ ------------
Weighted average number of
shares
Basic 17,518,544 10,985,405
============ ============
Diluted 18,022,815 10,985,405
============ ============
Use of Non-GAAP Financial Measures
The Company makes reference to non-GAAP financial measures.
Management believes that investors may find it useful to review our
financial results that exclude the non-cash expenses of change in
fair value of warrants and management owned options as a result of
the adoption of a Financial Accounting Standards Board's ("FASB")
ASC 815 (EITF 07-05) accounting standard effective from January 1,
2010.
Management believes that these non-GAAP financial measures are
useful to investors in that they provide supplemental information
to possibly better understand the underlying business trends and
operating performance of the Company. The Company uses these
non-GAAP financial measures to evaluate operating performance.
However, non-GAAP financial measures should not be considered as an
alternative to net income or any other performance measures derived
in accordance with GAAP.
Forward-Looking Statements
This press release contains statements that are forward-looking
in nature, including statements regarding the Company's competitive
position and product and service offerings. These statements are
based on current expectations on the date of this press release and
involve a number of risks and uncertainties, which may cause actual
results to differ significantly from such estimates. The risks
include, but are not limited to, the degree of market adoption of
the Company's product and service offerings; market competition;
dependence on strategic partners; and the Company's ability to
manage its business effectively in a rapidly evolving market.
Certain of these and other risks are set forth in more detail in
"Item 1A. Risk Factors" in China ACM's Annual Report on Form 10-K
for the fiscal year ended June 30, 2010. China ACM does not assume
any obligation to update or revise any such forward-looking
statements, whether as the result of new developments or
otherwise.
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2010 AND JUNE 30, 2010
SEPTEMBER 30, JUNE 30,
2010 2010
------------- -------------
UNAUDITED
-------------
ASSETS
CURRENT ASSETS:
Cash $ 12,718,521 $ 3,300,820
Restricted cash - 57,580
Accounts receivable, net of allowance for
doubtful accounts of $618,170 and $456,085,
respectively 51,102,000 36,072,691
Inventories 1,740,499 2,164,769
Other receivables 1,611,092 1,416,653
Prepayments 3,721,906 2,821,687
------------- -------------
Total current assets 70,894,018 45,834,200
------------- -------------
PLANT AND EQUIPMENT, net 28,198,369 26,488,354
------------- -------------
OTHER ASSETS:
Accounts receivable (non-current), net of
allowance for doubtful accounts of $19,119
and $4,607 respectively 1,580,474 364,371
Deferred tax assets - 127,741
Advances on equipment purchases 5,932,144 8,382,383
Long term prepayments 4,052,422 4,414,391
------------- -------------
Total other assets 11,565,040 13,288,886
------------- -------------
Total assets $ 110,657,427 $ 85,611,440
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term loans $ 10,508,940 $ -
Accounts payable 24,955,525 16,473,080
Customer deposits 1,391,144 711,219
Other payables 366,202 329,136
Other payables -- shareholders 817,256 772,644
Accrued liabilities 1,892,253 1,652,751
Taxes payable 2,220,864 1,569,914
------------- -------------
Total current liabilities 42,152,184 21,508,744
OTHER LIABILITIES
Warrants liabilities 2,766,262 2,920,520
------------- -------------
Total liabilities 44,918,446 24,429,264
------------- -------------
SHAREHOLDERS' EQUITY:
Common stock, $0.001 par value, 74,000,000
shares authorized, 17,584,604 and 17,467,104
shares issued and outstanding as of September
30, 2010 and June 30, 2010, respectively 17,585 17,467
Paid-in-capital 33,898,946 33,720,762
Retained earnings 22,856,268 19,912,444
Statutory reserves 4,876,017 4,511,520
Accumulated other comprehensive income 4,090,165 3,019,983
------------- -------------
Total shareholders' equity 65,738,981 61,182,176
------------- -------------
Total liabilities, and shareholders'
equity $ 110,657,427 $ 85,611,440
============= =============
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
2010 2009
------------ ------------
REVENUE
Sales of concrete $ 25,320,947 $ 14,886,757
Manufacturing services 4,471,777 2,805,614
Technical services 1,159,060 1,244,895
Others 5,298 543,870
------------ ------------
Total revenue 30,957,082 19,481,136
------------ ------------
COST OF REVENUE
Concrete 23,508,683 14,336,716
Manufacturing services 3,217,125 1,757,167
Technical services 106,010 54,483
Others - 45,734
------------ ------------
Total cost of revenue 26,831,818 16,194,100
------------ ------------
GROSS PROFIT 4,125,264 3,287,036
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,193,788 895,031
------------ ------------
INCOME FROM OPERATIONS 1,931,476 2,392,005
------------ ------------
OTHER INCOME (EXPENSE), NET
Other subsidy income 1,787,563 966,772
Non-operating income (expense), net 169,227 (49,203)
Change in fair value of warrant liability 154,258 (7,273,441)
Interest income 4,929 1,497
Interest expense (12,906) (23,753)
------------ ------------
TOTAL OTHER INCOME (EXPENSE), NET 2,103,071 (6,378,128)
------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 4,034,547 (3,986,123)
PROVISION FOR INCOME TAXES 726,226 536,814
------------ ------------
NET INCOME (LOSS) 3,308,321 (4,522,937)
DIVIDENDS AND ACCRETION ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK - 340,864
------------ ------------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS 3,308,321 (4,863,801)
------------ ------------
RECONCILIATION OF COMPREHENSIVE INCOME:
Net Income (loss) 3,308,321 (4,522,937)
Unrealized loss from marketable securities - (5,577)
Foreign currency translation adjustment 1,070,182 (62,431)
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 4,378,503 $ (4,590,945)
============ ============
EARNINGS (LOSSES) PER COMMON SHARE ALLOCATED TO
COMMON SHAREHOLDERS
Weighted average number of shares:
Basic 17,518,544 10,985,405
============ ============
Diluted 18,022,815 10,985,405
============ ============
Earnings (Losses) per share:
Basic $ 0.19 $ (0.44)
============ ============
Diluted $ 0.18 $ (0.44)
============ ============
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
2010 2009
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,308,321 $ (4,522,937)
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 862,140 668,020
Stock-based compensation expense 178,302 60,155
Bad debt expense 167,058 100,123
Change in fair value of warrants (154,258) 7,273,441
Changes in operating assets and liabilities
Accounts receivable (15,630,594) (8,261,428)
Note receivable - 10,775
Inventories 454,016 (445,100)
Other receivables (181,162) 3,021,495
Prepayments (844,255) (641,911)
Deferred tax assets 128,261 -
Long term prepayment 428,676 369,282
Accounts payable 7,967,380 4,462,894
Customer deposits 660,301 374,566
Other payables 32,377 18,317
Accrued liabilities 211,575 166,128
Taxes payable 617,851 (1,131,202)
------------ ------------
Net cash (used in) provided by operating
activities (1,794,011) 1,522,618
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash proceeds from sales of fixed assets 648,496 -
Purchase of property, plant and equipment (58,252) (101,183)
------------ ------------
Net cash provided by (used in) investing
activities 590,244 (101,183)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loan 10,485,440 -
Payments of short term loan - (4,385,260)
Rent financed by (payment to) shareholder 43,725 (51,435)
Restricted cash 57,580 235,710
Proceeds from issuance of common stock, net
of offering costs - 1,497,242
Preferred dividends paid - (155,655)
------------ ------------
Net cash provided by (used in) financing
activities 10,586,745 (2,859,398)
------------ ------------
EFFECTS OF EXCHANGE RATE CHANGE IN CASH 34,723 (8,861)
------------ ------------
NET INCREASE (DECREASE) IN CASH 9,417,701 (1,446,824)
CASH, beginning of period 3,300,820 3,634,805
------------ ------------
CASH, end of period $ 12,718,521 $ 2,187,981
============ ============
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Contact Financial Profiles Tricia Ross (916) 939-7285
tross@finprofiles.com Financial Profiles Moira Conlon Tel: (310)
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