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 first quarter of fiscal year 2012 ended September 30, 2011.
First Quarter FY 2012 Financial
Highlights
- Revenue increased 44% year-over-year to $44.6 million
- Gross margin at 24.1%
- Non-GAAP adjusted net income available to common shareholders
of $2.9 million
- Non-GAAP adjusted fully diluted EPS to common shareholders of
$0.17
- GAAP net income available to common shareholders of $3.1
million or $0.17 EPS
Management Commentary
Mr. Xianfu Han, Chairman and Chief Executive Officer of China
ACM, commented, "We experienced another quarter of revenue growth
for China ACM. During the first quarter, volumes at our Beijing
fixed plants increased as we expanded our customer base in our home
market."
"However, in light of ongoing quality inspections at high-speed
rail construction sites across the country, and the recent
government suspension of new and ongoing high-speed rail projects,
we experienced lower volumes at several of our manufacturing
services division plants in the quarter. As a result, we continue
to focus on managing our cost structure in anticipation of lower
volumes from our portable plant network for the foreseeable
future."
China ACM President and Chief Financial Officer Jeremy Goodwin
commented, "We are filing our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2011 today. This report is being filed
in the new SEC mandated XBRL format, which is meant to be more
investor friendly and accessible and is also being made available
in the investor relations portion of our website at
www.china-acm.com."
First Quarter FY 2012 Results
Revenue. Our revenue is primarily
generated from sales of our advanced ready-mix concrete products
and manufacturing services. For the three months ended September
30, 2011, we generated revenue of $44.6 million, compared to $31.0
million during the same period in 2010, an increase of $13.6
million, or 44%. The increase in our revenue is due primarily to
our increased revenue in our Beijing market for the three months
ended September 30, 2011 compared to the same period in 2010.
Our concrete sales revenue was $40.1 million for the three
months ended September 30, 2011, an increase of $14.8 million, or
58%. The increase in revenues was principally due to higher average
selling prices coupled with higher volumes as a result of a broader
client base.
Revenue from our manufacturing services segment was $4.5 million
for the three months ended September 30, 2011, which was flat as
compared to the three months ended September 30, 2010. The lack of
revenue growth, despite a higher number of portable plants in
service, was due to lower production levels in a number of the
Company's portable plants as a result of the ongoing quality
inspections at high-speed rail construction sites across the
country and the recent government suspension of new and ongoing
high-speed rail projects.
Gross Profit. Gross profit was $10.8
million for the three months ended September 30, 2011, as compared
to $4.1 million for the three months ended September 30, 2010. Our
gross profit for the sale of concrete was $9.9 million, or 24.8% of
revenue, for the three months ended September 30, 2011, as compared
to $1.8 million, or 7.2% of revenue, for the same period last year.
The increased gross profit margin reflects higher demand and higher
prices for our concrete products in Beijing as compared to the same
period last year.
Our gross profit with respect to our Manufacturing services
segment was $0.8 million, or 17.9% of revenue, for the three months
ended September 30, 2011, as compared to $1.3 million, or 28.1% of
revenue, for the same period last year. The decrease in gross
profit margin was principally the result of an increase in fixed
costs due to slowing production rates at plants impacted by the
ongoing quality inspections and the suspension of work on certain
high-speed rail projects.
Provision for Doubtful Accounts. We
incurred a provision for doubtful accounts of $7.0 million for the
three months ended September 30, 2011, an increase of approximately
$6.8 million, compared to $0.2 million for the same period last
year. The increased provision was the result of a change in the
accounting estimate for default rates on doubtful accounts within
one year based on industry comparable estimates.
Selling, General and Administrative
Expenses. We incurred selling, general and administrative
expenses of $2.7 million for the three months ended September 30,
2011, an increase of $0.7 million, as compared to $2.0 million for
the three months ended September 30, 2010. The increase was
principally due to an increase in employment, occupancy, and
professional expenses resulting from a larger base of operations as
compared to the prior year's quarter.
Adjusted Net Income available to Common
shareholders. Excluding the effect from non-cash charges
related to changes in fair market value of warrants, accretion of
discount on redeemable preferred stock and share-based
compensation, our adjusted net income available to common
shareholders was $2.9 million for the three months ended September
30, 2011, a decrease of 12% as compared to the same period in 2010.
See the attached section "Use of Non-GAAP Financial Measures" for
an explanation regarding the presentation of net income excluding
non-cash items.
Balance Sheet Overview
China ACM had working capital of $52.2 million at September 30,
2011, including $9.3 million in cash, equivalents and short term
investments and $4.3 million in total debt. Shareholders' equity
was $87.2 million compared with $83.1 million on June 30, 2011. The
total number of shares outstanding as of November 14, 2011 is
17,821,054 million.
Entry Into Merger Agreement with Novel Gain
Holdings Limited and CACMG Acquisition, Inc.
As announced on October 24, 2011, China ACM has entered into a
definitive agreement and plan of merger with Novel Gain Holdings
Limited, a British Virgin Islands company ("Novel Gain"), CACMG
Acquisition, Inc., a Delaware corporation and a wholly owned,
direct subsidiary of Novel Gain ("Merger Sub"), Mr. Xianfu Han and
Mr. Weili He, pursuant to which Merger Sub will merge with and into
the Company with the Company continuing as the surviving
corporation and a wholly owned subsidiary of Novel Gain. Mr. Han is
the Company's Chief Executive Officer and the Chairman of the
Company's Board of Directors and beneficially owns approximately
32.5% of the Company's outstanding shares of common stock, $0.001
par value per share (the "Company Common Stock"). Mr. He is the
Company's Chief Operating Officer and Vice-Chairman of the
Company's Board of Directors and beneficially owns approximately
17.0% of the outstanding Company Common Stock. In connection with
the proposed merger, the Company will prepare and mail a proxy
statement to its stockholders. In addition, certain participants in
the proposed transaction will prepare and mail to the Company's
stockholders a Schedule 13E-3 transaction statement. These
documents will be filed with, or furnished to, the SEC.
With the proposed transaction, the Company will not host a
conference call to discuss financial results for the first quarter
of fiscal year 2012.
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 Bird's 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
consulting 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 primarily to major high speed rail projects. More information
about the Company is available at www.china-acm.com.
Use of Non-GAAP Financial Measures
The Company makes reference to Non-GAAP financial measures in
portions of "Management's Discussion of Financial Condition and
Results of Operations". Management believes that investors may find
it useful to review our financial results that exclude the non-cash
expenses of $46,268 stock-based compensation and a gain of $195,476
in change of fair value of warrants liability, shown in the below
chart, due to the adoption of a Financial Accounting Standards
Board's ("FASB") ASC 815 (EITF 07-05) accounting standard as
discussed in the section "Derivative Liability" below.
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.
Three Months Ended
September 30,
------------------------
2011 2010 Increase
(Decrease)
----------- ----------- -----------
Net Income available to Common
shareholders - GAAP $ 3,092,066 $ 3,308,321 $ (216,255)
Add Back:
Change in fair value of warrants (a) $ (195,476) $ (154,258) $ (41,218)
----------- ----------- -----------
Add Back:
Change in Equity-Based Compensation
(b) $ 46,268 $ 178,302 $ (132,034)
----------- ----------- -----------
Adjusted Net Income available to
Common shareholders -Non-GAAP $ 2,942,858 $ 3,332,365 $ (389,507)
----------- ----------- -----------
Basic earnings per share - GAAP $ 0.17 $ 0.19 $ (0.02)
Add back:
Change in fair value of warrant $ (0.01) $ (0.01) $ (0.00)
----------- ----------- -----------
Add back:
Change in Equity-Based Compensation $ 0.01 $ 0.01 $ (0.00)
----------- ----------- -----------
Adjusted basic earnings per share
Non-GAAP $ 0.17 $ 0.19 $ (0.02)
----------- ----------- -----------
Diluted earnings per share-GAAP $ 0.17 $ 0.18 $ (0.01)
Add back:
Change in fair value of warrant $ (0.01) $ (0.01) $ (0.00)
----------- ----------- -----------
Add back:
Change in Equity-Based Compensation $ 0.01 $ 0.01 $ (0.00)
----------- ----------- -----------
Adjusted diluted earnings per share
Non-GAAP $ 0.17 $ 0.18 $ (0.01)
----------- ----------- -----------
Weighted average number of shares
Basic 17,806,072 17,518,544 287,528
=========== =========== ==========
Diluted 17,828,572 18,022,815 (194,243)
=========== =========== ==========
(a) The Company adopted the provisions of FASB accounting
standard ASC 815 (EITF 07-05), which provides standards with
respect to determining whether an instrument (or embedded feature)
is indexed to an entity's own stock. As a result of adopting this
accounting standard, warrants previously treated as equity pursuant
to the derivative treatment exemption are no longer afforded equity
treatment because the warrants have a down-round ratchet provision
on the exercise price. As a result, the warrants are not considered
indexed to the Company's own stock, and as such, all future changes
in the fair value of these warrants will be recognized currently in
earnings until such time as the warrants are exercised or expired.
Effective July 1, 2009, the Company reclassified the fair value of
these warrants from equity to liability, as if these warrants were
treated as a derivative liability since their issuance in June
2008. The Company recognized a $195,476 and $154,258 gain from the
change in fair value for the three months ended September 30, 2011
and 2010, respectively.
(b) The Company records stock-based compensation expense
pursuant to FASB's accounting standard regarding stock compensation
which requires companies to measure compensation cost for
stock-based employee compensation plans at fair value at the grant
date and recognize the expense over the employee's requisite
service period. For the three months ended September 30, 2011 and
2010, the Company recognized $46,268 and $178,302 as compensation
expense for its restricted stock grants, respectively.
Safe Harbor Statement This press release
may include certain statements that are not descriptions of
historical facts, but are forward-looking statements. Such
statements include, among others, those concerning our expected
financial results in fiscal year 2012 and our ability to deliver
such results, expected growth in industry demand and our business,
our expected financial performance and strategic and operational
plans, our future operating results, the degree of market adoption
of our 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, as
well as all assumptions, expectations, predictions, intentions or
beliefs about future events. Forward-looking statements can be
identified by the use of forward-looking terminology such as
'will,' 'believes,' 'expects' or similar expressions. Such
information is based upon expectations of our management that were
reasonable when made but may prove to be incorrect. All of such
assumptions are inherently subject to uncertainties and
contingencies beyond our control and based upon premises with
respect to future business decisions, which are subject to change.
We do not undertake to update the forward-looking statements
contained in this press release. For a description of the risks and
uncertainties that may cause actual results to differ from the
forward-looking statements contained in this press release, see our
most recent Annual Report on Form 10-K filed with the Securities
and Exchange Commission ('SEC'), and our subsequent SEC filings.
Copies of filings made with the SEC are available through the SEC's
electronic data gathering analysis retrieval system at
http://www.sec.gov.
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
ASSETS 2011 2011
--------------- ---------------
CURRENT ASSETS:
Cash $ 3,231,634 $ 1,610,699
Restricted cash 1,126,080 928,200
Accounts receivable, net of allowance
for doubtful accounts of $12,712,880
and $5,627,049, respectively 100,666,920 84,793,355
Inventories 2,211,207 1,474,728
Investment 5,036,080 12,221,300
Other receivables 2,423,219 2,226,803
Prepayments 3,987,967 5,089,935
--------------- ---------------
Total current assets 118,683,107 108,345,020
--------------- ---------------
PROPERTY, PLANT AND EQUIPMENT, net 28,558,313 29,279,440
--------------- ---------------
OTHER ASSETS:
Advances on equipment purchases 4,559,060 4,509,505
Prepayments 2,278,793 2,702,409
--------------- ---------------
Total other assets 6,837,853 7,211,914
--------------- ---------------
Total assets $ 154,079,273 $ 144,836,374
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term loans, banks $ 4,316,640 $ 15,470,000
Accounts payable 55,257,948 41,320,769
Customer deposits 575,494 391,550
Other payables 2,675,317 488,022
Other payables - shareholders 802,859 790,592
Accrued liabilities 1,685,472 1,921,582
Taxes payable 1,179,393 747,165
--------------- ---------------
Total current liabilities 66,493,123 61,129,680
OTHER LIABILITIES
Warrants liability 423,181 618,657
--------------- ---------------
Total liabilities 66,916,304 61,748,337
--------------- ---------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
1,000,000 shares authorized; no shares
issued or outstanding - -
Common stock, $0.001 par value,
74,000,000 shares authorized,
17,806,887 and 17,794,387 shares issued
and outstanding as of September 30,
2011 and June 30, 2011, respectively 17,807 17,795
Additional paid-in capital 35,027,281 34,981,023
Retained earnings 38,010,078 35,240,851
Statutory reserves 6,571,196 6,248,357
Accumulated other comprehensive income 7,536,607 6,600,011
--------------- ---------------
Total shareholders' equity 87,162,969 83,088,037
--------------- ---------------
Total liabilities and shareholders' equity $ 154,079,273 $ 144,836,374
=============== ===============
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months ended
September 30,
2011 2010
--------------- ---------------
REVENUE
Sales of concrete $ 40,085,039 $ 25,320,947
Manufacturing services 4,499,968 4,471,777
Technical services - 1,159,060
Other - 5,298
--------------- ---------------
Total revenue 44,585,007 30,957,082
--------------- ---------------
COST OF REVENUE
Concrete 30,137,524 23,508,683
Manufacturing services 3,692,937 3,217,125
Technical services - 106,010
--------------- ---------------
Total cost of revenue 33,830,461 26,831,818
--------------- ---------------
GROSS PROFIT 10,754,546 4,125,264
PROVISION FOR DOUBTFUL ACCOUNTS 7,001,540 167,058
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,709,440 2,026,730
--------------- ---------------
INCOME FROM OPERATIONS 1,043,566 1,931,476
--------------- ---------------
OTHER INCOME (EXPENSE), NET
Other subsidy income 2,685,390 1,787,563
Non-operating (expense), net (54,205) 169,227
Change in fair value of warrants
liability 195,476 154,258
Interest income 222,644 4,929
Interest expense (299,176) (12,906)
--------------- ---------------
TOTAL OTHER INCOME (EXPENSE), NET 2,750,129 2,103,071
--------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,793,695 4,034,547
PROVISION FOR INCOME TAXES 701,629 726,226
--------------- ---------------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 3,092,066 $ 3,308,321
=============== ===============
COMPREHENSIVE INCOME:
Net Income 3,092,066 3,308,321
Foreign currency translation
adjustment 936,596 1,070,182
--------------- ---------------
COMPREHENSIVE INCOME $ 4,028,662 $ 4,378,503
=============== ===============
EARNINGS PER COMMON SHARE ALLOCATED TO
COMMON SHAREHOLDERS
Weighted average number of shares:
Basic 17,806,072 17,518,544
=============== ===============
Diluted 17,828,572 18,022,815
=============== ===============
Earnings per share:
Basic $ 0.17 $ 0.19
=============== ===============
Diluted $ 0.17 $ 0.18
=============== ===============
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
September 30,
2011 2010
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,092,066 $ 3,308,321
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation 1,082,560 862,140
Stock-based compensation expense 46,268 178,302
Deferred tax provision - 128,261
Provision for doubtful accounts 7,001,540 167,058
Change in fair value of warrants
liability (195,476) (154,258)
Loss realized from disposal of property,
plant, and equipment 3,989 -
Changes in operating assets and
liabilities
Accounts receivable (21,817,592) (15,630,594)
Notes receivable (77,950) -
Inventories (717,970) 454,016
Other receivables (171,396) (181,162)
Prepayments 1,154,199 (844,255)
Long term prepayment 451,864 428,676
Accounts payable 13,440,000 7,967,380
Customer deposits 179,067 660,301
Other payables 2,175,686 32,377
Accrued liabilities (255,984) 211,575
Taxes payable 422,662 617,851
------------ ------------
Net cash provided by (used in) operating
activities 5,813,533 (1,794,011)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property, plant,
and equipment 6,236 648,496
Purchases of property, plant and equipment (53,240) (58,252)
Proceeds from sale of investments 7,296,120 -
------------ ------------
Net cash provided by investing activities 7,249,116 590,244
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loan 795,090 10,485,440
Payments for short term loan (12,082,250) -
Rent payment to shareholder 11,792 43,725
Restricted cash (187,080) 57,580
------------ ------------
Net cash (used in) provided by financing
activities (11,462,448) 10,586,745
------------ ------------
EFFECT OF EXCHANGE RATE CHANGE ON CASH 20,734 34,723
------------ ------------
NET INCREASE IN CASH 1,620,935 9,417,701
CASH, beginning of period 1,610,699 3,300,820
------------ ------------
CASH, end of period $ 3,231,634 $ 12,718,521
============ ============
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tross@finprofiles.com Financial Profiles Moira Conlon Tel: (310)
478-2700 x11 mconlon@finprofiles.com
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