CHINA GREEN MATERIAL TECHNOLOGIES, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE DATED APRIL 13, 2011 - April 15, 2011

Attached files

file filename
8-K - CURRENT REPORT - CHINA GREEN MATERIAL TECHNOLOGIES, INC.f8k-04132011.htm
Exhibit 99.1
 
China Green Material Technologies, Inc. Reports 2010 Financial Results
-- 2010 revenues increased 49.5% to a record $20.0 million
-- 2010 EPS of $0.21
-- 2010 adjusted EPS of $0.24 (non-GAAP)
-- 2010 cash flow from operations of $4.3 million
 
HARBIN, China, April 13, 2011 /PRNewswire-Asia/ -- China Green Material Technologies, Inc. (OTCQB Market: CAGM; "CAGM" or "the Company"), a China-based leader in developing and manufacturing starch-based biodegradable, disposable containers, tableware and packaging materials, today announced financial results for the full year ended December 31, 2010.
 
Full Year of 2010:
 
Revenues – Total revenues increased 49.5% to $20.0 million for the year ended December 31, 2010 from $13.4 million in the year ended December 31, 2009. The increased revenues reflect strong reorders from existing customers, orders from seven new customers, and expansion in the supermarket sector.  The Company increased average selling prices by approximately 6.4% and tons of volume sold by 40.6% in the year ended December 31, 2010.  99.4% of revenue was derived from the domestic China market and 32.6% came from customized product orders.
 
Mr. Su Zhonghao, Chief Executive Officer of the Company, declared, "We experienced further acceleration in our revenue growth to 49.5% for the year ended December 31, 2010. This strong momentum reflects growing demand from new and existing customers in China, particularly for the product categories of disposable cups, containers and plates. As we continue to introduce new branded products, which are stronger and less expensive than those from our competitors, we are poised to capture additional market share in the rapidly growing RMB 2.5 billion biodegradable products market in China."
 
Gross Profit - Gross profit increased 38.3% to $8.8 million for the year ended December 31, 2010 compared to $6.4 million in the year ended December 31, 2009, while gross margin was 43.9% in 2010 versus 47.4% a year ago.  The decrease in the gross margin percentage was largely due to an increase in overall production costs by 13.5%, which were mainly caused by higher raw material prices and depreciation and amortization costs.
 
Operating Expense - Operating expenses totaled $2.1 million, or 10.3% of revenue, for the year ended December 31, 2010 versus $1.0 million, or 7.7% of revenue, for the year ended December 31, 2009. Selling expenses were constant at $0.2 million year-over-year while general and administrative expenses increased to $1.6 million compared to $0.8 million in 2009. The increase in operating expenses included a $0.2 million increase in salaries of non-production personnel and related costs, Zhonghao Bio start-up costs of $0.2 million, and professional fees of $0.4 million for the year ended December 31, 2010.
 
 
 
1
 
Operating Income – Operating income increased 26.5% to $6.7 million for the year ended December 31, 2010 from $5.3 million for the year ended December 31, 2009. The operating margin was 33.6% in 2010 versus 39.7% a year ago. Excluding stock compensation, the operating margin was 34.4%, down 5.3% compared to 2009.
 
Other Income (Expense) - Other expenses were $0.6 million in the year ended December 31, 2010 versus $0.43 million for the year ended December 31, 2009.
 
Net Income - Net income was $5.2 million for the year ended December 31, 2010 compared to $4.2 million for the year ended December 31, 2009.  Adjusted net income (non-GAAP) was $5.8 million, an increase of 26.5% over 2009 adjusted net income.  Net income per diluted share was $0.21 for the year ended December 31, 2010 versus net income per diluted share of $0.22 for the year ended December 31, 2009 based on weighted average shares of 24.6 million and 18.7 million, respectively. Adjusted net income per diluted share (non-GAAP) was $0.24 in the year ended December 31, 2010. The increase in share count reflects the issuance of 6.9 million common shares in two private placements completed in the first and second quarters of 2010.  
 
The Company's effective tax rate was 15.0% for the year ended December 31, 2010 versus 15.1% for the year ended December 31, 2009.
 
"We are focused on expanding our capacity to meet the robust demand for our products. During the year, we substantially completed construction of our new state-of-the-art facility which is located in the Harbin Economic and Technological Development Zone. The new facility brings our production capacity to 20,000 tons of finished products annually, an increase of 122%. To the extent we are able to scale up towards full capacity during 2011; our revenues should increase this year. The facility also allows us to operate more efficiently and provides the ability to fill larger orders from our growing base of domestic and international customers. I am extremely excited about the future growth outlook for our Company," concluded Mr. Su.  
 
Liquidity and Capital Resources:
 
Cash flow from operations for the year ended December 31, 2010 totaled $4.3 million. As of December 31, 2010, the Company had $12.1 million in cash and cash equivalents, an increase of approximately $4.8 million from the end of 2009, primarily due to net proceeds of $7.3 million from private placements completed during 2010 and cash flow from operations, offset by $8.1 million of equipment and property investments for the new manufacturing facility. The Company had $23.9 million in working capital and no long-term debt as of December 31, 2010.
 
About China Green Material Technologies, Inc.
 
Website: http://www.sinogreenmaterial.com
 
 
 
 
2
 
China Green Material Technologies, Inc. (CAGM.pk) is a China-based manufacturer of starch-based biodegradable, disposable containers, disposable tableware and disposable packaging materials. Headquartered in Harbin city of China, the Company currently has 245 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, other factors 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, 2011. 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.
 

 
 
3
 

 
ITEM 1.  FINANCIAL STATEMENTS.
 
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBERT 31, 2010 AND 2009
  
               
   
As of Dec 31,
    
   
2010
    
2009
    
Assets
              
Current Assets:
              
        Cash and equivalents
  
$
12,090,345
    
$
7,321,276
    
        Restricted cash
    
4,266
      
3,443
    
        Accounts receivable, net      
    
10,097,506
      
6,524,510
    
        Inventories
    
684,534
      
456,970
    
        Other receivables
    
203,844
      
549,288
    
        Deferred consulting expense
    
108,036
      
-
    
        Other current assets
    
570,596
      
127,507
    
        Deferred income taxes
    
147,207
      
4,918
    
Total Current Assets
    
23,906,334
      
14,987,912
    
                   
Deposits for construction
    
301,992
      
-
    
Property and Equipment, Net
    
17,372,325
      
10,394,584
    
Intangible Assets, Net
    
5,103,278
      
5,060,559
    
Know-how Right, Net
    
2,000,695
      
2,160,533
    
Investment - Net
    
15,154
      
310,419
    
Total Assets
  
$
48,699,778
    
$
32,914,007
    
                   
Liabilities and Stockholders' Equity
                  
Current Liabilities:
                  
        Accounts payable and accrued expenses
  
$
539,275
    
$
307,140
    
        Deferred revenue
    
14,695
      
4,213
    
        Advances from a third party
    
1,371,042
      
-
    
        Due to stockholders/officers, net
    
208,404
      
300,792
    
        Warrants liability
    
95,085
      
-
    
        Taxes payable
    
738,647
      
430,408
    
        Contingent liabilities
    
1,509,958
      
1,464,768
    
Total Liabilities
    
4,477,106
      
2,507,321
    
                   
Commitments and contingencies
                  
                   
Stockholders' Equity
                  
Preferred stock $0.001 par value, 20,000,000 shares authorized
and 0 shares issued and outstanding
    
-
      
-
    
Common stock, $0.001 par value, 100,000,000 shares authorized,
25,701,025 and 18,711,388 shares issued at December 31, 2010
and 2009, respectively
    
25,701
      
18,711
    
        Additional paid-in capital
    
25,191,392
      
17,895,324
    
        Reserve funds
    
1,699,062
      
1,152,569
    
        Retained earnings
    
12,405,789
      
7,709,729
    
        Accumulated other comprehensive income
    
4,900,728
      
3,630,353
    
Total Stockholders' Equity
    
44,222,672
      
30,406,686
    
Total Liabilities and Stockholders' Equity
  
$
48,699,778
    
$
32,914,007
    
   
                   

 

 
 
4
 


 
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2010 AND 2009
  
               
   
Years Ended
Dec 31,
    
   
2010
    
2009
    
               
Revenues
  
$
20,042,025
    
$
13,407,287
    
Cost of Goods Sold
    
11,252,625
      
7,052,854
    
                   
Gross Profit
    
8,789,400
      
6,354,433
    
                   
Operating Expenses
                  
       Selling expenses
    
242,378
      
238,274
    
       General and administrative expenses
    
1,647,891
      
792,587
    
       Stock based compensation
    
167,163
      
-
    
Total Operating Expenses
    
2,057,432
      
1,030,861
    
                   
Income From Operations
    
6,731,968
      
5,323,572
    
                   
Other Income (Expenses)
                  
       Interest income
    
8,586
      
5,635
    
       Interest expense
    
(316)
      
-
    
       Net rental (expense)/income
    
(123,163)
      
24,057
    
       Impairment of investment
    
(300,595)
      
-
    
       Loss on fixed assets disposal and intangible assets written off
    
(126,728)
      
(459,695)
    
       Other  (expense) income, net
    
(21,992)
      
567
    
                   
Total Other Expenses
    
(564,208)
      
(429,436)
    
                   
Income Before Income Taxes
    
6,167,760
      
4,894,136
    
                   
Provision for Income Taxes
    
925,207
      
738,810
    
                   
Net Income
  
$
5,242,553
    
$
4,155,326
    
                   
Foreign Currency Translation Adjustment
    
1,270,375
      
(20,380)
    
                   
Comprehensive Income
  
$
6,512,928
    
$
4,134,946
    
                   
Net Income Per Common Share -Basic and Diluted
                  
 -Basic
  
$
0.21
    
$
0.22
    
 -Diluted
  
$
0.21
    
$
0.22
    
                   
Weight Common Shares Outstanding -Basic and Diluted
                  
 -Basic
    
24,457,767
      
18,711,388
    
 -Diluted
    
24,621,490
      
18,711,388
    
   
                   
 
 

 
 
5
 

 
 
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
  
               
   
For The Years Ended Dec 31,
    
   
2010
    
2009
    
Cash flows From Operating Activities:
              
      Net Income
  
$
5,242,553
    
$
4,155,326
    
      Adjustments to reconcile net income to net cash
                  
      provided by operating activities
                  
            Depreciation and amortization
    
1,636,663
      
1,320,118
    
            Stock based compensation
    
167,163
      
-
    
            Deferred income taxes benefits
    
(139,061)
      
(4,915)
    
            Bad debt expense
    
(33,068)
      
5,954
    
            Impairment of long-term investment
    
300,595
      
-
    
            Amortization of deferred consulting revenue
    
955,468
      
-
    
            Changes in warrants fair value
    
(968,420)
      
-
    
            Loss on disposal of fixed assets
    
126,728
      
64,444
    
            Loss on disposal of intangible assets
    
-
      
395,251
    
      Changes in operating assets and liabilities
                  
            Accounts receivable
    
(3,265,653)
      
(1,180,460)
    
            Inventories
    
(208,845)
      
(105,859)
    
            Other receivables
    
354,545
      
(19,021)
    
            Prepaid expenses
    
-
      
(14,467)
    
            Other current assets
    
(429,648)
      
(156,153)
    
            Accounts payable and accrued expenses
    
221,558
      
(65,133)
    
            Deferred revenue
    
10,128
      
(10,308)
    
            Tax payable
    
287,242
      
357,040
    
Net Cash Provided by Operating Activities
    
4,257,948
      
4,741,817
    
                   
Cash Flows From Investing Activities:
                  
            Restricted cash
    
(701)
      
(3,443)
    
            Deposit for construction
    
(295,455)
      
-
    
            Purchase of property and equipment
    
(8,061,980)
      
(91,736)
    
            Deposit for purchase of know-how right
    
-
      
(732,384)
    
            Proceeds from sold the property and equipment
    
118,182
      
158,832
    
Net Cash Used in Investing Activities
    
(8,239,954)
      
(668,731)
    
                   
Cash Flows From Financing Activities:
                  
            Proceeds from stock issued
    
7,135,894
      
-
    
            Advance from a third party
    
1,341,364
      
-
    
            Repayments of stockholders/officers loans
    
(99,458)
      
(1,025,338)
    
            Proceeds from stockholders/officers loans
    
-
      
29,645
    
Net Cash (Used in) Provided by Financing Activities
    
8,377,800
      
(995,693)
    
                   
Net Increase in Cash and Equivalents
    
4,395,794
      
3,077,393
    
Effect of Exchange Rate Changes on Cash and Equivalents
    
373,275
      
(1,161)
    
Cash and Equivalents at Beginning of Year
    
7,321,276
      
4,245,044
    
Cash and Equivalents at End of Year
  
$
12,090,345
    
$
7,321,276
    
                   
SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION
                  
            Cash paid for Interest
  
$
-
    
$
-
    
            Cash paid for Income taxes
  
$
923,043
    
$
534,610
    
                   
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
                  
            Issuance of warrants for IR consulting expenses
    
1,063,506 
      
- 
    
            Incurred contingent liabilities for purchase of know-how right
  
$
-
    
$
1,464,768
    
   
                   
 
 
 
 
6
 
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 and earnings per share to the equivalent GAAP measure.
 
12 Months Ended December 31, 2010:
  
   
12 months Ended
  
(in thousands, except per share data)
31-Dec
  
31-Dec
  
   
2010
  
2009
  
Net income
$5,242
  
$4,155
  
Loss on investments
$301
  
-
  
Non-cash stock compensation expense
$167
  
-
  
Loss on fixed and intangible asset disposal
$127
  
$460
  
Start-up costs for Zhonghao Biodegradable Materials Co., Ltd
$166
      
Adjusted net income (non-GAAP)
$6,003
  
$4,615
  
         
Net Income per Common Share, Basic and Diluted
$0.21
  
$0.22
  
Effect of adjustments described above
$0.03
  
$0.03
  
Adjusted diluted earnings per share (non-GAAP):
        
Basic
  
$0.24
  
$0.25
  
Diluted
  
$0.24
  
$0.25
  
           
           
   
           

 
For more information, please contact:
  
   
Mr. Low Yan Seong, CFO
  
China Green Material Technologies, Inc.
  
Email: cfo@sinogreenmaterial.com
  
Web:  http://www.sinogreenmaterial.com  
  
   
 
Mr. Buddy Lee, Corporate Secretary
  
China Green Material Technologies, Inc.
  
Email: secretary@sinogreenmaterial.com
  
Office: +86-451-5175-0888
  
 
 
 
 
 

 
7
 
 

CHINA GREEN MATERIAL TECHNOLOGIES, INC. Reports