CHINA GREEN MATERIAL TECHNOLOGIES INC. 
By HARBIN, China, Nov. 9, 2010 /PRNewswire-Asia-FirstCall/ -- 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 third quarter ended September 30, 2010.
Third Quarter 2010:
Revenues - Third quarter revenues increased 43.6% to $6.0 million from $4.2 million in the third quarter of 2009. The increased revenues reflect strong reorders from existing customers, orders from six new customers and expansion in the supermarket sector. The Company increased average selling prices by approximately 8.5% in the third quarter of 2010 and gained a 32.4% increase in tonnage sold. 31.5% of sales emanated from customized product orders and 99% of sales were domestically centric in the PRC.
Mr. Su Zhonghao, Chief Executive Officer of the Company, declared, "We experienced further acceleration in our revenue growth which increased from 28.4% during the first half of this year to 43.6% in the third quarter. This strong momentum reflects growing demand from new and existing customers in China, particularly for the product categories of disposable cups, disposable containers and disposable plates. As we continue to introduce new branded products, which are stronger and less expensive than those from our competitors, while expanding our distribution capabilities to make our products available to more Chinese consumers, we are poised to capture additional market share in the rapidly growing RMB2.5 billion biodegradable products market in China." (Source: Degradable Plastics Committee of China Plastics Processing Industry Association)
Gross Profit - Gross profit in the third quarter of 2010 increased 35% to $2.7 million compared to $2.0 million in the third quarter of last year, while gross margin was 45.6% versus 48.6% a year ago. The decrease in the gross margin percentage was largely due to increases in raw material prices, amortization expenses of intangible assets, depreciation expenses, and increases in packaging and utility costs.
Operating Expense - Operating expenses in the third quarter of 2010 totaled $0.7 million, or 12.2% of sales versus $0.3 million, or 6.4% of sales in the third quarter of 2009. Selling expenses were down 50% year-over-year, while general and administrative expenses increased to $0.7 million in compared to $0.2 million in 2009. The increase in operating expenses included a $0.2 million increase stock compensation expenses and a $0.1 million increase in consulting traveling expenses.
Operating Income - 2010 third quarter income from operations increased 13.9% to $2.0 million from $1.8 million in the year ago period. Operating margin was 33.5% in the 2010 period versus 42.2% a year ago. Excluding the stock compensation, operating margin was 37.3%, down 4.9% compared to the same period last year.
Other Income (Expense) - Other expenses were $0.03 million in the third quarter of 2010 versus a $0.45 million expense in the third quarter of 2009.
Net Income - Net income in the third quarter of 2010 was $1.7 compared to $1.1 million in the third quarter of 2009. Adjusted net income (non-GAAP) was $1.9 million, an increase of 22.4% versus a year ago adjusted net income. Net income per diluted share was $0.07 in the third quarter of 2010 versus net income per diluted share of $0.06 in the third quarter of 2009 based on weighted average shares of 25.9 million and 18.7 million, respectively. Adjusted net income per diluted share (non-GAAP) was $0.07 in the third quarter of 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 14.6% in the third quarter of 2010 versus 15.6% for the same period in 2009.
"We are focused on expanding our capacity to meet the robust demand for our products. During the third quarter, we completed construction of our new state-of-the-art facility which is located in Harbin Economic and Technological Development Zone. We completed the buildout on schedule and once fully utilized, will enable us to produce 11,000 tons of finished products each year, which expands our currently capacity by 122%. We will scale into this during the coming year as we grow our revenues and gain additional market share. More specifically, we expect to be operating at 13,000 tons of capacity by the end of this year and scaling to full capacity at 20,000 tons by the end of 2011. The new facility allows us to operate more efficiently and will provide the ability to fill larger orders from our growing base of domestic and international customers. All in all, I am extremely excited about the future growth outlook for China Green Materials," concluded Mr. Su.
First Nine months of 2010:
Revenues - Revenues increased 34.9% in the first nine months of 2010 to $13.3 million compared to $9.9 million in the same period of 2009. The company gained a 29.5% increase in tonnage sold over the same year ago period while average selling prices increased 4.2% year-over-year.
Gross Profit - Gross profit in the first nine months of 2010 increased by $1.4 million, or 28.6%, to $6.1 million compared to $4.8 million in the third half of last year, while gross margin decreased 2.2% to 46.0%. The Company expects to maintain solid gross profit margins by reducing production costs as it brings new capacity online next year and through additional price increases to offset the increase in raw material prices.
Operating Expense - Operating expenses in the first nine months of 2010 totaled $1.9 million, or 14.6% of sales versus $0.7 million, or 7.4% of sales in the first nine months of 2009. Selling expenses during the first nine months of 2010 were comparable in both periods at $0.2 million, while general and administrative expenses increased to $1.8 million in the 2010 period compared to $0.5 million in the 2009 period. The $1.3 million increase was due to increases in overall salaries, $0.7 million in non-cash stock compensation expenses, and $0.4 million for professional fees and traveling expenses directly related to being a public company
Operating Income - Income from operations for the first nine months of 2010 was essentially flat year-over-year at $3.6 million. Operating margin was 27.3% in the 2010 period versus 36.4% a year ago. Excluding stock compensation expense, operating margin was 32.6%.
Other Income (Expense) - Other expenses were $0.5 million in the first nine months of 2010 compared to $0.4 million in the same period last year.
Net Income - Net income for the first nine months of 2010 was $3.1 compared to $3.0 million in the year ago period. Net income per diluted share was $0.13 in the first nine months of 2010 versus net income per diluted share of $0.16 in the first nine months of 2009 based on weighted average shares of 24.2 million and 18.7 million, respectively. Adjusted net income (non-GAAP) was $4.2 million, an increase of 19.7% versus a year ago. Adjusted net income per diluted share (non-GAAP) was $0.17 and $0.19 for the first nine months of 2010 and 2009, respectively. The increase in share count reflects the issuance of 6.9 million common shares in private placements completed during the first nine months of 2010.
Liquidity and Capital Resources:
As of September 30, 2010, the Company had $10.8 million in cash and cash equivalents, an increase of approximately $3.5 million from the end of 2009, primarily due to net proceeds from private placements completed during 2010, offset by $7.6 million of equipment and property investments for the new manufacturing facility. Cash flow from operations in for the first nine months of 2010 totaled $2.9 million. The Company made progress on improving its accounts receivable turnover, with Days Sales Outstanding decreasing from 187 days in the first quarter to 132 days in the third quarter of 2010, based on annualized quarterly revenue. The Company had $17.5 million in working capital and no long-term debt as of September 30, 2010. The current ratio was 6 to 1.
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
CONSOLIDATED BALANCE SHEETS
September December
30, 31,
2010 ---------
---- 2009
(Unaudited) ----
-----------
Assets
------
Current Assets:
Cash and equivalents $10,751,062 $7,321,276
Cash - restricted 26,849 3,443
Accounts receivable, net 8,706,659 6,524,510
Inventories 794,356 456,970
Accrued receivables 134,306 549,288
Other receivables 363,053 19,210
Deferred income tax assets 156,070 4,918
Prepaid expenses 26,715 29,434
Other current assets - 78,863
--- ------
Total Current Assets 20,959,070 14,987,912
Deposits to suppliers of
property and equipment 298,459 -
Property and equipment, net 17,117,251 10,394,584
Intangible assets, net 5,071,592 5,060,559
Know-how right, net 2,117,190 2,160,533
Investment, net 16,298 310,419
------ -------
Total Assets $45,579,860 $32,914,007
=========== ===========
Liabilities and
Stockholders' Equity
--------------------
Current Liabilities:
Accounts payable and accrued
expenses $364,996 $302,786
Customer deposits 2,494 4,213
Due to stockholders/
officers, net 311,468 300,793
Taxes payable 358,129 430,408
Other current liabilities 2,477,205 1,469,121
--------- ---------
Total Current Liabilities 3,514,292 2,507,321
--------- ---------
Stockholders' Equity
Common stock, $0.001 par
value, 100,000,000 shares
authorized,25,701,025 and
18,711,388 shares issued
and outstanding at
September 30, 2010 and
December 31, 2009,
respectively 25,701 18,711
Additional paid-in capital 25,721,674 17,895,324
Reserve funds 1,513,422 1,152,569
Retained earnings 10,419,522 7,709,729
Accumulated other
comprehensive income 4,385,249 3,630,353
--------- ---------
Total Stockholders' Equity 42,065,568 30,406,686
---------- ----------
Total Liabilities and
Stockholders' Equity $45,579,860 $32,914,007
=========== ===========
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
Three Months Ended
September 30,
2010 2009
Revenues $6,011,160 $4,185,043
Cost of goods sold 3,267,745 2,152,844
Gross profit 2,743,415 2,032,199
Operating Expenses
Selling expenses 47,025 80,751
General and administrative
expenses 459,914 186,921
Stock based compensation 225,845 -
Total Operating Expenses 732,784 267,672
Income From Operations 2,010,631 1,764,527
Other income (expense):
Interest income 2,404 1,798
Net rental income/
(expenses) (28,343) 6,014
Impairment of investment (2,851) -
Loss on fixed assets
disposal and intangible
assets written off - (458,599)
Other expenses - net (1,091) 81
Total other income (expense) (29,881) (450,706)
Income Before Income Taxes 1,980,750 1,313,821
Provision for income taxes 289,826 204,622
Net Income 1,690,924 1,109,199
Foreign currency translation
adjustment 556,202 18,965
Comprehensive Income $2,247,126 $1,128,164
Net Income Per Common Share
basic $0.07 $0.06
diluted $0.07 $0.06
Weighted Common Shares
Outstanding
basic 25,650,856 18,711,388
diluted 25,919,251 18,711,388
Nine Months Ended
September 30,
2010 2009
Revenues $13,294,342 $9,856,609
Cost of goods sold 7,183,850 5,106,128
Gross profit 6,110,492 4,750,481
Operating Expenses
Selling expenses 134,304 196,358
General and administrative
expenses 1,113,162 528,736
Stock based compensation 697,446 -
Total Operating Expenses 1,944,912 725,094
Income From Operations 4,165,580 4,025,387
Other income (expense):
Interest income 5,343 3,792
Net rental income/
(expenses) (94,373) 18,039
Impairment of investment (296,102) -
Loss on fixed assets
disposal and intangible
assets written off (126,025) (459,611)
Other expenses - net (18,975) (375)
Total other income (expense) (530,132) (438,155)
Income Before Income Taxes 3,635,448 3,587,232
Provision for income taxes 564,804 546,637
Net Income 3,070,644 3,040,595
Foreign currency translation
adjustment 754,896 (12,182)
Comprehensive Income $3,825,540 $3,028,413
Net Income Per Common Share
basic $0.13 $0.16
diluted $0.13 $0.16
Weighted Common Shares
Outstanding
basic 24,046,432 18,711,388
diluted 24,218,671 18,711,388
CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
Nine Months Ended
September 30,
2010 2009
---- ----
Cash flows From Operating
Activities:
Net Income $3,070,644 $3,040,595
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities
Depreciation and
amortization 1,053,794 970,702
Changes in deferred tax (148,710) (58,980)
Bad debt expenses 10,096 8,427
Stock based compensation 697,446 -
Impairment of investment 296,102 -
Loss on disposal of fixed
assets 126,025 64,432
Loss on disposal of
intangible assets - 395,179
Changes in operating
assets and liabilities
Accounts receivable (2,037,616) (1,676,002)
Inventories (323,686) 7,402
Accrued receivables 418,689 -
Prepaid expenses and other
receivables (255,823) (29,060)
Other current assets - (61,357)
Accounts payable and
accrued expenses 51,432 (46,303)
Customer deposits (1,770) (6,991)
Taxes payable (79,117) 439,979
Other current liabilities - (123,683)
--- --------
Net Cash Provided by
Operating Activities 2,877,506 2,924,340
--------- ---------
Cash Flows From Investing
Activities:
Restricted cash (23,346) (946)
Advances to suppliers of
property and equipment (293,817) -
Purchase of property and
equipment (7,557,790) (64,384)
Deposit for purchase of
patent rights - (146,492)
Proceeds from disposal of
fixed assets 117,527 158,803
------- -------
Net Cash Used in Investing
Activities (7,757,426) (53,019)
---------- -------
Cash Flows From Financing
Activities:
Payment to shareholders/
officers loans - (1,025,441)
Proceeds from
shareholders/officers
loans 4,956 19,799
Advance from third party 969,596 -
Proceeds from stock issued 7,135,894 -
--------- ---
Net Cash Provided by (Used
in) Financing Activities 8,110,446 (1,005,642)
--------- ----------
Effect of Exchange Rate
Changes on Cash and
Equivalents 199,260 2,527
------- -----
Net Increase in Cash and
Equivalents 3,429,786 1,868,206
Cash and Equivalents at
Beginning of Period 7,321,276 4,243,140
--------- ---------
Cash and Equivalents at
End of Period $10,751,062 $6,111,346
=========== ==========
SUPPLEMENT DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid for Interest $ - $ -
=== === === ===
Cash paid for Income taxes $581,158 $533,673
======== ========
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 September 30, 2010:
----------------------------------
Third Quarter
Ended
(in thousands, except
per share data) 30-September 30-September
2010 2009
Net income $1,691 $1,109
Loss on investments $3 -
Non-cash stock
compensation expense $226 -
Loss on fixed and
intangible asset
disposal - $459
Adjusted net income
(non-GAAP) $1,920 $1,568
Adjusted diluted
earnings per share
(non-GAAP):
Basic $0.07 $0.08
Diluted $0.07 $0.08
9 Months Ended September 30, 2010:
----------------------------------
Nine months Ended
(in thousands, except
per share data) 30-September 30-September
2010 2009
Net income $3,071 $3,041
Loss on disposal of
fixed assets $126 460
Loss on investments $296 -
Non-cash stock
compensation expense $697 -
Adjusted net income
(non-GAAP) $4,190 $3,501
Adjusted diluted
earnings per share
(non-GAAP):
Basic $0.17 $0.19
Diluted $0.17 $0.19
For more information, please contact:
In China:
Low Yan Seong, CFO
China Green Material Technologies, Inc.
Email: cfo@sinogreenmaterial.com
Web: http://www.sinogreenmaterial.com
Buddy Lee, Corporate Secretary
China Green Material Technologies, Inc.
Email: secretary@sinogreenmaterial.com
Office: +86-451-51750888
Feng Peng
HC International, Inc.
Phone: +86-138-12271616
Email: feng.peng@hcinternational.net
In the U.S.:
Ted Haberfield
HC International, Inc.
Phone: +1-760-755-2716
Email: thaberfield@hcinternational.net
Web: http://www.hcinternational.netSOURCE China Green Material Technologies, Inc.
