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China ACM Reports First Quarter Fiscal Year 2012 Results; Revenue up 44% to $44.6 Million

BEIJING, CHINA -- (Marketwire) -- 11/14/11 -- 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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