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| 8-K - FORM 8-K - China Advanced Construction Materials Group, Inc | d8k.htm |
China ACM Reports Fourth Quarter and Fiscal Year 2012
Results; FY-12 Revenue Up 5.0% to $145.1 Million
Teleconference Begins Today
at 8 a.m. Eastern
BEIJING -- (Marketwire) -- 09/26/12 -- 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 audited financial results for the fiscal year ended June 30, 2012.
Fourth Quarter FY 2012 Financial Highlights
- Revenue decreased 21% year over year to $39.1 million
- Gross margin at 21.0%
- Net loss available to common shareholders of $5.6 million
Fiscal Year 2012 Financial Highlights
- Revenue increased 5% year over year to $145.1 million
- Gross margin at 19.7%
- Net loss available to common shareholders of $6.2 million
- $52 million in working capital at June 30, 2012
Fourth Quarter FY 2011 Results
Revenue. Our revenue is primarily generated from sales of our advanced ready-mix concrete products, manufacturing services and technical consulting services. For the three months ended June 30, 2012, we generated revenue of $39.1 million, compared to $49.3 million during the same period in 2011, a decrease of $10.2 million. The decrease in our revenue is due primarily to decreased revenue from our manufacturing services and concrete sales for the three months ended June 30, 2012.
Our concrete sales revenue was $36.7 million for the three months ended June 30, 2102, a decrease of $4.6 million from the three months ended June 30, 2011. In 2012, the real estate industry, closely related to the concrete products industry, was under continuous regulation and control. Demand for ready-mix concrete dropped significantly The decrease in revenues from concrete sales was principally due to lower demand of concrete compared to the same period of last year.
Revenue from our manufacturing services segment was $2.4 million for the three months ended June 30, 2012, decrease of $5.5 million as compared to the three months ended June 30, 2011. Such decrease in revenue was attributable principally due to the suspension of operations of a number of our portable plants during the year ended June 30, 2012, in light of an increase in audit inspections at high speed rail construction sites around China resulting from the recent heightened public scrutiny of railway safety in China.
Gross Profit. Gross profit was $8.2 million for the three months ended June 30, 2012, as compared to $10.8 million for the three months ended June 30, 2011. Our gross profit for the sale of concrete was $7.8 million, or 21.3% of revenue, for the three months ended June 30, 2012, as compared to $8.1 million, or 19.6% of revenue, for the same period last year. The increased gross profit margin reflects 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 $0.4 million, or 16.5% of revenue, for the three months ended June 30, 2012, as compared to gross profit of $2.7 million, or 33.8% of revenue, for the same period last year. The decrease in gross profit margin was principally the result of the suspension of operations of our portable plants for year ended June 30, 2012, and slowing production rates at plants nearing project completion and extended project delays stemming from delayed municipal government resident relocation efforts, increase in costs of transportation, a larger employee base and suspended operations due to ongoing government quality and audit inspections at high speed rail construction sites around China.
Provision for doubtful accounts. We incurred provision for doubtful accounts of $8.6 million for the three months ended June 30, 2012, an increase of $2.1 million, as compared to $6.5 million for the three months ended June 30, 2011. We expect longer collection period on accounts receivable and higher probability of uncollectable accounts receivable, and therefore changed the estimate of our allowance for doubtful accounts within one year from our historical default rate of 2% to 5% based on peers’ comparable rate in domestic construction industry during the year ended June 30, 2012.
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Selling, General and Administrative Expenses. We incurred selling, general and administrative expenses of $4.3 million for the three months ended June 30, 2012, an increase of $1.6 million, as compared to $2.7 million for the three months ended June 30, 2011. The increase was principally due to a $0.4 million increase in salary and benefits, a $0.7 million increase in consulting and auditing expenses, a $0.4 million increase in insurance expense and a $0.6 million increase in conference and other general expenses, offset by a $0.2 million decrease in R&D expense and a $0.3 million decrease in other expenses.
Impairment of long-lived assets. We incurred a $3.4 million impairment charge related to our portable plants due to the carrying value exceeding the fair value of the related portable plants during the three months ended June 30, 2012.
Net Income (loss) available to Common shareholders. We recognized net loss of approximately $5.6 million for the three months ended June 30, 2012, as compared to net income of approximately $7.0 million for the three months ended June 30, 2011, a decrease of $12.6 million. Such decrease in net income was primarily due to an increase in provision of doubtful accounts, impairment charge of long-lived assets, research and development expenses, consulting service associated with the going private transaction and selling, general, and administrative expense from an increase in our labor base and scale of operations, offset by higher prices, growth of our client base, and increase in our plant production capacity across our Beijing concrete plant network.
Fiscal Year 2012 Results
Revenue. For the year ended June 30, 2012, we generated total revenue of approximately $145.1 million compared to approximately $137.9 million during the year ended June 30, 2011, an increase of approximately $7.2 million or 5%. Such increase is due to our sales generated from the concrete division for the year ended June 30, 2012. In addition, on November 15, 2010, we announced a 25% average price increase across our various concrete grade sales to keep in line with an average raw material cost increase of 19.8% . As a result, our concrete sales revenue was approximately $134.8 million for the year ended June 30, 2012, an increase of approximately $25.5 million, or 23% compared to the year ended June 30, 2011. The increase in revenues attributable to concrete sales was principally due to greater capacity utilization at our Beijing fixed plants coupled with higher prices and organic growth to include a broader client base.
During the year ended June 30, 2012, we continued to supply concrete products to ten railway projects throughout China through our portable plants, specifically our projects located in Shaanxi Province, Jiangsu Province, Hebei Province, Guangxi Province, Zhejiang Province, Liaoning Province, and Anhui Province. These seven projects contributed approximately $10.4 million to our total revenue for the year ended June 30, 2012, a decrease of approximately $15.2 million, or 60%, compared to the year ended June 30, 2011. The decrease in revenues attributable to our manufacturing services was principally due to the suspension of operations of a number of our portable plants for the year ended June 30, 2012 in light of an increase in audit inspections at high speed rail construction sites around China resulting from the recent heightened public scrutiny of railway safety in China. For these railway projects, the general contractors generally supplied their own raw materials while we provided manufacturing and transportation services.
Gross Profit. Total gross profit was approximately $28.6 million for the year ended June 30, 2012, as compared to approximately $25.6 million for the year ended June 30, 2011. Our gross profit for sale of concrete was approximately $27.7 million, or 21% of revenue, for the year ended June 30, 2012, compared to approximately $15.5 million, or 14% of revenue for the year ended June 30, 2011, an increase of approximately $12.2 million. The higher gross profit for concrete sales for the year ended June 30, 2012, compared with the year ended June 30, 2011, reflects higher demand and higher prices for our concrete products in Beijing as compared to the prior fiscal year. The primary reason for the margin increase in concrete sales from 14% in the year ended June 30, 2011, is due to a 25% average price increase in the second fiscal quarter of our 2011 fiscal year across our various concrete grade sales to keep in line with an average raw material cost increase of 19.8% in addition to improving overall operational efficiencies at our Beijing fixed plants. We intend to continue to adjust our concrete sales prices in tandem with price fluctuations in cement.
Our gross profit with respect to our manufacturing services was approximately $0.9 million, or 8% for the year ended June 30, 2012, a decrease of $6.7 million from the $7.6 million during the year ended June 30, 2011. Such decrease was principally due to the suspension of operations of our portable plants for year ended June 30, 2012. The primary reasons for the margin decrease compared to the same period last year were the slowing production rates at plants nearing project completion and extended project delays stemming from delayed municipal government resident relocation efforts, increase in costs of transportation, a larger employee base and suspended operations due to ongoing government quality and audit inspections at high speed rail construction sites around China.
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Provision for doubtful accounts. We incurred provision for doubtful accounts of $22.5 million for the year ended June 30, 2012, an increase of $15.1 million, as compared to $7.4 million for the year ended June 30, 2011. We expect a longer collection period on accounts receivable and higher probability of uncollectable accounts receivable, and therefore changed the estimate of our allowance for doubtful accounts within one year from our historical default rate of 2% to 5% based on peers’ comparable rate in domestic construction industry during the year ended June 30, 2012. As a result, our accounts receivable increased and the provision for doubtful accounts also increased. Some of our customers appeared to have the problems of declining business and shortage in cash. The allowance for doubtful accounts increased to approximately $24.9 million at June 30, 2012, compared to approximately $5.6 million at June 30, 2011.
Selling, General and Administrative Expenses. We incurred selling, general and administrative expenses of approximately $13.1 million for the year ended June 30, 2012, an increase of approximately $4.5 million, or 52%, as compared to approximately $8.6 million for the year ended June 30, 2011. The increase was principally due to a $2 million increase in consulting service, a $1.1 million increase in salary and employment benefit expense, a $1.1 million increase in conference expense and meal & entertainment expense, a $0.5 million increase in audit & professional expenses, a $0.2 increase in depreciation expense, a $0.2 million increase in auto expenses and $0.3 million increase in other business expenses resulting from higher production, offset by a $0.7 million decrease in share-based compensation expense and a $0.2 million decrease in rent expense.
Research and development expenses. Research and development expenses for the year ended June 30, 2012 was $2.9 million, an increase of approximately $2.3 million, or 384%, as compared to approximately $0.6 million for the year ended June 30, 2011, due to the additional costs incurred, primarily due to increased personnel costs, engineering supplies and material purchases.
Impairment of long-lived assets. We incurred a $3.4 million impairment charge related to our portable plants due to the carrying value exceeding the fair value of the related portable plants during the year ended June 30, 2012.
Net Income (loss) available to Common shareholders. We recognized net loss of approximately $6.2 million for the year ended June 30, 2012, as compared to net income of approximately $17.1 million for the year ended June 30, 2011, a decrease of $23.3 million. Such decrease in net income was primarily due to an increase in provision of doubtful accounts, impairment charge of long-lived assets, research and development expenses, consulting service associated with the going private transaction and selling, general, and administrative expense from an increase in our labor base and scale of operations, offset by higher prices, growth of our client base, and increase in our plant production capacity across our Beijing concrete plant network
Balance Sheet Overview
China ACM had working capital of $52 million at June 30, 2012, including $2.4 million in cash, equivalents and short term investments, restricted cash of approximately $6.5 million and $19 million in total debt. Shareholders' equity was $79.0 million compared with $83.1 million on June 30, 2011. The total number of shares outstanding as of September 25, 2012 was 17.8 million.
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.
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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 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.
- Tables to Follow -
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CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2012 AND 2011
| 2012 | 2011 | |||||
|
ASSETS |
||||||
| CURRENT ASSETS: | ||||||
| Cash | $ | 2,409,914 | $ | 1,610,699 | ||
| Restricted cash | 6,536,082 | 928,200 | ||||
| Accounts and notes receivable, net of allowance for doubtful accounts of $24,913,151 and $5,627,049, respectively | 109,977,143 | 84,793,355 | ||||
| Inventories | 2,042,156 | 1,474,728 | ||||
| Investments | - | 12,221,300 | ||||
| Other receivables | 1,298,942 | 2,226,803 | ||||
| Prepayments | 11,694,758 | 5,089,935 | ||||
| Deferred tax assets | 3,293,051 | - | ||||
|
Total current assets |
137,252,046 | 108,345,020 | ||||
| PROPERTY, PLANT AND EQUIPMENT, net | 20,622,505 | 29,279,440 | ||||
| OTHER ASSETS: | ||||||
| Advances on equipment purchases | 4,617,360 | 4,509,505 | ||||
| Prepayments | 1,140,498 | 2,702,409 | ||||
| Deferred tax assets | 578,413 | - | ||||
| Total other assets | 6,336,271 | 7,211,914 | ||||
| Total assets | $ | 164,210,822 | $ | 144,836,374 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Short term loans, banks | $ | 19,008,000 | $ | 15,470,000 | ||
| Accounts payable | 57,171,917 | 41,320,769 | ||||
| Customer deposits | 798,096 | 391,550 | ||||
| Other payables | 4,514,828 | 488,022 | ||||
| Other payables - shareholders | 804,001 | 790,592 | ||||
| Accrued liabilities | 1,712,414 | 1,921,582 | ||||
| Warrants liability | 132,427 | - | ||||
| Taxes payable | 1,064,953 | 747,165 | ||||
| Total current liabilities | 85,206,636 | 61,129,680 | ||||
| OTHER LIABILITIES | ||||||
| Warrants liability | - | 618,657 | ||||
| Total liabilities | 85,206,636 | 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, 17,829,464 and 17,794,387 shares issued and outstanding as of June 30, 2012 and June 30, 2011, respectively |
17,829 | 17,795 | ||||
|
Additional paid-in capital |
35,154,257 | 34,981,023 | ||||
|
Retained earnings |
29,010,766 | 35,240,851 | ||||
| Statutory reserves | 6,248,357 | 6,248,357 | ||||
| Accumulated other comprehensive income | 8,572,977 | 6,600,011 | ||||
| Total shareholders’ equity | 79,004,186 | 83,088,037 | ||||
| Total liabilities and shareholders’ equity | $ | 164,210,822 | $ | 144,836,374 |
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CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
| 2012 | 2011 | |||||
| REVENUE | ||||||
| Sales of concrete | $ | 134,772,498 | $ | 109,276,550 | ||
| Manufacturing services | 10,369,387 | 25,619,062 | ||||
| Technical services | - | 3,001,866 | ||||
| Other | 889 | 11,292 | ||||
| Total revenue | 145,142,774 | 137,908,770 | ||||
| COST OF REVENUE | ||||||
| Concrete | 107,045,899 | 93,783,945 | ||||
| Manufacturing services | 9,509,245 | 18,056,445 | ||||
| Technical services | - | 423,983 | ||||
| Total cost of revenue | 116,555,144 | 112,264,373 | ||||
| GROSS PROFIT | 28,587,630 | 25,644,397 | ||||
| PROVISION FOR DOUBTFUL ACCOUNTS | 22,490,204 | 7,377,395 | ||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 13,064,966 | 8,617,554 | ||||
| RESEARCH AND DEVELOPMENT EXPENSES | 2,946,226 | 608,696 | ||||
| IMPAIRMENT LOSS OF LONG-LIVED ASSETS | 3,380,952 | - | ||||
| INCOME (LOSS) FROM OPERATIONS | (13,294,718 | ) | 9,040,752 | |||
| OTHER INCOME (EXPENSE), NET | ||||||
| Other subsidy income | 8,718,901 | 8,083,763 | ||||
| Non-operating expense, net | (1,056,900 | ) | (349,763 | ) | ||
| Change in fair value of warrants liability | 445,603 | 1,926,948 | ||||
| Interest income | 448,279 | 591,376 | ||||
| Interest expense | (1,620,562 | ) | (703,837 | ) | ||
| TOTAL OTHER INCOME, NET | 6,935,321 | 9,548,487 | ||||
| INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | (6,359,397 | ) | 18,589,239 | |||
| PROVISION (BENEFIT) FOR INCOME TAXES | (129,312 | ) | 1,523,995 | |||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (6,230,085 | ) | $ | 17,065,244 | |
| COMPREHENSIVE INCOME (LOSS): | ||||||
| Net Income (Loss) | (6,230,085 | ) | 17,065,244 | |||
| Foreign currency translation adjustment | 1,972,966 | 3,580,028 | ||||
| COMPREHENSIVE INCOME (LOSS) | $ | (4,257,119 | ) | $ | 20,645,272 | |
| EARNINGS (LOSS) PER COMMON SHARE ALLOCATED TO COMMON SHAREHOLDERS | ||||||
| Weighted average number of shares: | ||||||
| Basic | 17,818,474 | 17,671,648 | ||||
| Diluted | 17,818,474 | 18,142,630 | ||||
| Earnings (Loss) per share: | ||||||
| Basic | $ | (0.35 | ) | $ | 0.97 | |
| Diluted | $ | (0.35 | ) | $ | 0.94 |
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CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JUNE 30, 2012 AND 2011
| 2012 | 2011 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net (loss) income | $ | (6,230,085 | ) | $ | 17,065,244 | |
| Adjustments to reconcile net (loss) income to cash used in operating activities: | ||||||
| Depreciation | 4,386,734 | 3,898,278 | ||||
| Stock-based compensation expense | 132,641 | 885,674 | ||||
| Deferred tax provision (benefit) | (3,871,464 | ) | 131,053 | |||
| Provision for doubtful accounts | 22,490,204 | 7,377,395 | ||||
| Change in fair value of warrants liability | (445,603 | ) | (1,926,948 | ) | ||
| Loss realized from disposal of property, plant, and equipment | 968,093 | 271,529 | ||||
| Impairment loss of long-lived assets | 3,380,952 | - | ||||
| Changes in operating assets and liabilities | ||||||
| Accounts and notes receivable | (45,499,782 | ) | (52,826,499 | ) | ||
| Inventories | (528,797 | ) | 780,312 | |||
| Other receivables | 974,926 | (734,177 | ) | |||
| Prepayments | (6,442,157 | ) | (2,077,737 | ) | ||
| Long term prepayment | 1,616,277 | 1,889,000 | ||||
| Accounts payable | 14,769,037 | 23,464,257 | ||||
| Customer deposits | 394,674 | (347,174 | ) | |||
| Other payables | 3,991,849 | 142,306 | ||||
| Accrued liabilities | (250,285 | ) | 187,540 | |||
| Taxes payable | 322,466 | (880,754 | ) | |||
| Net cash used in operating activities | (9,840,320 | ) | (2,700,701 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Proceeds from disposal of property, plant, and equipment | 960,623 | 753,022 | ||||
| Purchases of property, plant and equipment | (398,257 | ) | (2,142,699 | ) | ||
| Investments | 12,434,600 | (11,880,800 | ) | |||
| Net cash provided by (used in) investing activities | 12,996,966 | (13,270,477 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds from short term loan | 31,247,070 | 15,025,600 | ||||
| Payments for short term loan | (28,071,740 | ) | (75,560 | ) | ||
| Rent payable to shareholder | 11,906 | 16,466 | ||||
| Restricted cash | (5,550,419 | ) | (849,140 | ) | ||
| Net cash (used in) provided by financing activities | (2,363,183 | ) | 14,117,366 | |||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | 5,752 | 163,691 | ||||
| NET INCREASE (DECREASE) IN CASH | 799,215 | (1,690,121 | ) | |||
| CASH, beginning of year | 1,610,699 | 3,300,820 | ||||
| CASH, end of year | $ | 2,409,914 | $ | 1,610,699 | ||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS | ||||||
| Cashless conversion of warrants into common stocks | $ | 40,627 | $ | - | ||
| Contact | ||||||
| China ACM Investor Relations | ||||||
| +86-010-82525361 |
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