Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CHINA GENGSHENG MINERALS, INC. | d8k.htm |
Exhibit 99.1
China GengSheng Minerals Reports Fourth Quarter and Full Year 2011 Financial Results
GONGYI, China, April 16, 2011 – China GengSheng Minerals, Inc. (NYSE Amex: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced its financial results for the fourth quarter and full year ended December 31, 2011.
Fourth Quarter 2011 Financial Highlights:
-
Quarterly revenue increased 1.4% year-over-year to approximately $18.9 million.
-
Fracture proppant sales were approximately $5.7million, an increase of 13.8% year-over-year compared with approximately $5.0 million in the fourth quarter of 2010;
-
Refractories sales were approximately $10.7 million, compared with approximately $12.7 million in the fourth quarter of 2010.
-
Fine precision abrasives product sales were approximately $2.9 million, an increase of 327.3% year- over-year compared with approximately $0.7 million in the fourth quarter of 2010.
-
-
Gross profit was approximately $1.1 million, or 5.7% of total sales, compared with 20.7% of total sales in the same period a year ago.
-
Total operating expenses increased to approximately 7.1 million, compared with approximately $5.2 million in the fourth quarter of 2010.
-
Net loss attributable to the Company was approximately $8.0 million, or $0.30 per share, compared with net loss of approximately $2.1 million, or $0.08 per share in the fourth quarter of 2010.
-
As of December 31, 2011, the Company had cash and cash equivalents of approximately $3.6 million, stockholders’ equity of approximately $53.8 million and working capital of approximately $11.8 million.
Fiscal Year 2011 Financial Highlights:
-
Revenue increased 23.7% year-over-year to approximately $76.9 million, compared with approximately $62.2 million in 2010.
-
Gross profit was down 8.4% year-over-year to approximately $16.2 million, or 21.1% of total sales, compared with approximately $17.7 million, or 28.4% of total sales in 2010.
-
Total operating expense increased to approximately $19.3 million, or 25.1% of total sales, compared with approximately $15.4 million, or 24.7% of total sales in 2010.
-
Net loss attributable to the Company’s common stockholders was approximately $7.5 million, or $0.28 per share, compared with net income of approximately $0.3 million, or $0.01 per share in 2010.
“In 2011 we continued our efforts in products positioning and strategic progress for GengSheng. We committed resources to, and expanded production capacity of targeted areas, hence to improve our ability to address the overall unstable environment in our end markets,” said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. “During the fourth quarter and throughout the year, our bottom line was impacted by increased material, energy and labor costs, operating expenses, financing costs and non-cash impairment charges. While these increased expenses weighed on our results for 2011, we adopted stringent approaches to eliminate impaired assets in our books.”
Financial Results for the Three Months Ended December 31, 2011
For the fourth quarter of 2011, sales revenue was approximately $18.9 million, an increase of 1.4%, compared with approximately $18.6 million in the fourth quarter of 2010. The increase was mainly attributable to the increased sales from the fracture proppant and fine precision abrasive segments, which was partially offset by the decreased sales from the refractories and high-temperature segments. Sales of the Company’s core refractory products totaled approximately $10.7 million, or 56.8% of total sales, a decrease of 15.3%, compared with approximately $12.7 million in the fourth quarter of 2010. The year-over-year decline in refractories sales is mainly related to the continued consolidation of the steel industry in China which reduced the demand for our refractory products. Sales of fracture proppant products totaled approximately $5.7 million, or 30.1% of total sales, an increase of 13.8%, compared with approximately $5.0 million in the fourth quarter of 2010. The year-over-year increase in fracture proppant products sales was mainly due to the growth in export sales. Sales of fine precision abrasives products totaled approximately $2.9 million, compared with $0.7 million in the fourth quarter of 2010. Our sales of precision abrasive started in the third quarter of 2010. Cost of goods sold totaled $17.8 million, an increase of 20.6%, compared with $14.7 million for the same period a year ago. The increase in cost of goods sold resulted from continued increase in raw material price, higher energy and labor cost.
Gross profit for the three months ended December 31, 2011, was approximately $1.1 million, or 5.7% of revenue, compared with approximately $3.9 million, or 20.7% of revenue in the fourth quarter of 2010. The decrease in gross profit and gross margin for the quarter was mainly attributable to the increased average raw material prices and decreased gross margin for fine precision abrasives segment.
For the three months ended December 31, 2011, total operating expenses were approximately $7.1 million, compared with approximately $5.2 million in the year-ago period. The increase in operating expenses was primarily related to the increased general and administrative expenses, non-cash impairment charges and increased allowance for doubtful accounts.
General and administrative expenses increased by approximately $0.9 million to approximately $2.2 million for the fourth quarter in 2011, from approximately $1.3 million for the fourth quarter in 2010. The increase in general and administrative expenses was primarily related to increased salaries and personnel expenses and higher depreciation expenses.
Impairments on goodwill and intangible assets were approximately $0.8 million for the fourth quarter in 2011. There was no impairment expenses in the fourth quarter in 2010. The increase was attributable to the write-off of goodwill related to the acquisition of one subsidiary and the write-off of intangible assets related to an unpatented technology acquired in 2007.
Allowance for doubtful accounts was approximately $0.9 million for the fourth quarter in 2011, compared with approximately $0.4 million in the fourth quarter of 2010. The increase was primarily attributable to the change in our provisioning policy which increases the allowance for accounts receivables aged over three years and other receivables which have uncertainties in collectability in the fourth quarter of 2011.
Selling expenses decreased by approximately $0.6 million, to approximately $2.7 million for the three months ended December 31, 2011, compared with approximately $3.3 million for the three months ended December 31, 2010. The decrease in selling expenses was primarily attributable to the change in product mix because, in the fourth quarter, we sold more fracture proppants products and fine precision abrasives which normally incur lower selling expenses than refractory segment.
Impairments on deposit for acquisition of a non-consolidated affiliated were approximately $1.2 million for the three months ended December 31, 2011. This non-cash impairment charge was related to our investment in a non-consolidated affiliate which is expected to be completed by May 2012.
Finance costs totaled approximately $1.4 million for the three months ended December 31, 2011, compared with approximately $0.5 million in the same period in 2010. The increase in finance costs was primarily due to the increase in borrowing activities in the fourth quarter of 2011.
Net loss attributable to Company's common stockholders was approximately $7.6 million, or $0.30 per share, compared with approximately $2.1 million, or $0.08 per share, in the same period of 2010. The net loss for the quarter was primarily attributable to the factors described above.
Financial Results for the Twelve Months Ended December 31, 2011
For the year ended December 31, 2011, sales revenue increased 23.7% to approximately $76.9 million, compared with approximately $62.2 million for 2010. Sales of the Company’s core refractory products totaled approximately $46.6 million, or 60.5% of total sales, compared with approximately $45.8 million, or 73.6% of total sales in 2010. Sales of fracture proppant products totaled approximately $22.5 million, or 29.3% of total sales, compared with approximately $14.3 million, or 23.0% of total sales in 2010. Sales of fine precision abrasives products totaled approximately $7.4 million or 9.6% of total sales, compared with approximately $0.9 million, or 1.4% of total sales in 2010. Our sales of precision abrasive started in the third quarter of 2010. Sales of industrial ceramics products totaled approximately $0.4 million, or 0.6% of total sales, compared with approximately $1.2 million for the year-ago period.
Gross profit for the twelve months ended December 31, 2011 was approximately $16.2 million, or 21.1% of revenue, compared with gross profit of approximately $17.7 million, or 28.4% of revenue in 2010. The decrease in gross profit was mainly attributable to the decreased gross margin in our fine precision abrasives segment and the increase in the cost of raw materials, energy and labor costs in refractories segment compared with 2010.
General and administrative expenses, totaled approximately $7.0 million, compared with approximately $5.7 million in 2010. Selling expenses for 2011 were approximately $9.5 million, compared with approximately $8.4 million in 2010. Research and development expenses for 2011 were approximately $0.7 million, compared with approximately $0.8 million in 2010. Allowance for doubtful accounts was approximately $1.3 million, compared with approximately $0.4 million in 2010. Non-cash impairment charges on goodwill and intangible assets were approximately $0.8 million in 2011. Total operating expenses were approximately $19.3 million, compared with approximately $15.4 million in the year-ago period.
Finance costs totaled approximately $5.3 million in 2011, compared with approximately $1.8 million in 2010. This substantial increase was primarily due to an increase of approximately $2.0 million in bills discounting charges as we discounted more bills receivable instead of holding them to maturity and an increase of approximately $1.5 million in interest expenses as we increased borrowing activities in 2011. Income tax expense was approximately $0.3 million in 2011, compared with approximately $0.5 million in 2010. Income taxes incurred in the PRC and were calculated based on the Chinese GAAP for each individual subsidiary.
Net loss attributable to Company's common stockholders was approximately $7.5 million, or $0.28 per share, compared with net income of approximately $0.3 million, or $0.01 per share, for 2010, due to the reasons discussed above.
As of December 31, 2011, the Company had cash and cash equivalents totaling approximately $3.6 million, working capital of approximately $11.8 million and stockholders’ equity of approximately $53.8 million. This compares with cash and cash equivalents of approximately $0.9 million, working capital of approximately $20.0 million and stockholders’ equity of approximately $51.3 million, as of December 31, 2010.
About China GengSheng Minerals, Inc.
China GengSheng Minerals, Inc. ("GengSheng") develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics, fracture proppants and fine precision abrasives. A market leader offering customized solutions, GengSheng sells its products primarily to the iron and steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment, while reducing their consumption of energy. Founded in 1986 and based in China's Henan province, GengSheng currently has over 170 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries. GengSheng conducts business through GengSheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan GengSheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd., Henan GengSheng Micronized Powder Materials Co., Ltd, Guizhou SouthEast Prefecture Co., Ltd., GengSheng New Materials Co., Ltd, Henan GengSheng High Temperature Materials Co., Ltd. and Henan Yuxing Proppant Co., Ltd.
For more information about the Company, please visit http://www.gengsheng.com.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China GengSheng Minerals, Inc., and its subsidiary companies. All statements other than statements of historical fact included herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's ability to meet its projected output for the term of the supply contract; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. 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 factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. 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.
For more information, please contact:
China GengSheng Minerals, Inc.
Investor Relations
Mr. Shuai Zhang
ir@gengsheng.com
+86-371-6405-9846
China GengSheng Minerals, Inc.
Consolidated Balance Sheets
| As of
December 31, 2011 |
As of
December 31, 2010 |
|||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 3,594,361 | $ | 925,052 | ||
| Restricted cash | 21,094,008 | 21,693,100 | ||||
| Trade receivables, net | 49,167,748 | 43,240,996 | ||||
| Bills receivable | 6,331,997 | 3,074,156 | ||||
| Other receivables and prepayments, net | 8,451,185 | 7,024,142 | ||||
| Advances to senior management | 360,162 | 51,449 | ||||
| Inventories, net | 16,956,582 | 15,679,492 | ||||
| Deferred tax assets, net of valuation allowance | - | 244,046 | ||||
| Total current assets | 105,956,043 | 91,932,433 | ||||
| Deposit for acquisition of a non-consolidated affiliate, net | 1,092,041 | 2,275,500 | ||||
| Deposits for acquisition of land use right, property, plant and equipment | 618,892 | 1,061,502 | ||||
| Goodwill, net | - | 441,089 | ||||
| Intangible assets, net | - | 379,250 | ||||
| Property, plant and equipment, net | 37,164,849 | 26,188,235 | ||||
| Land use rights | 3,137,961 | 944,166 | ||||
| TOTAL ASSETS | $ | 147,969,786 | $ | 123,222,175 | ||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities: | ||||||
| Trade payables | $ | 18,671,086 | $ | 14,279,568 | ||
| Bills payable | 16,385,340 | 8,495,200 | ||||
| Other payables and accrued expenses | 8,877,407 | 5,198,131 | ||||
| Deferred revenue - Government grants | 443,632 | 394,420 | ||||
| Provision of warranty | 184,778 | 69,739 | ||||
| Income taxes payable | 218,038 | 606,877 | ||||
| Non-interest-bearing loans | 3,318,472 | 1,062,114 | ||||
| Collateralized short-term bank loans | 45,974,022 | 41,641,650 | ||||
| Deferred tax liabilities | 112,625 | 149,578 | ||||
| Warrant liabilities | - | - | ||||
| TOTAL LIABILITIES | 94,185,400 | 71,897,277 |
COMMITMENTS AND CONTINGENCIES
| STOCKHOLDERS' EQUITY | ||||||
Preferred stock - $0.001 par value 50,000,000 shares authorized, no shares issued and outstanding |
- | - | ||||
Common stock - $0.001 par value 100,000,000 shares authorized in 2011 and 2010; issued and outstanding 26,803,044 shares in 2011 and 24,294,386 shares in 2010 |
26,803 | 24,294 | ||||
| Additional paid-in capital | 28,197,310 | 19,903,388 | ||||
| Statutory and other reserves | 8,110,972 | 7,521,114 | ||||
| Accumulated other comprehensive income | 7,713,341 | 5,949,455 | ||||
| Retained earnings | 9,541,560 | 17,636,730 | ||||
| Total China GengSheng Minerals, Inc. stockholders' equity | 53,589,986 | 51,034,981 | ||||
| NONCONTROLLING INTEREST | 194,400 | 289,917 | ||||
| TOTAL EQUITY | 53,784,386 | 51,324,898 | ||||
| TOTAL LIABILITIES AND EQUITY | $ | 147,969,786 | $ | 123,222,175 |
China GengSheng Minerals,
Inc.
Consolidated Statements of Operations and Comprehensive Loss
|
|
Year ended December 31, | |||||
|
|
2011 | 2010 | ||||
|
Sales revenue |
$ | 76,935,665 | $ | 62,188,656 | ||
|
Cost of goods sold |
60,726,627 | 44,498,585 | ||||
|
|
||||||
|
Gross profit |
16,209,038 | 17,690,071 | ||||
|
|
||||||
|
Operating expenses |
||||||
|
Allowance for doubtful accounts |
1,334,736 | 437,318 | ||||
|
General and administrative expenses |
7,010,822 | 5,740,604 | ||||
|
Impairment on goodwill |
441,089 | - | ||||
|
Impairment on intangible assets |
309,800 | - | ||||
|
Research and development expenses |
699,367 | 817,179 | ||||
|
Selling expenses |
9,491,077 | 8,365,181 | ||||
|
|
||||||
|
Total operating expenses |
19,286,891 | 15,360,282 | ||||
|
|
||||||
|
(Loss) income from operations |
(3,077,853 | ) | 2,329,789 | |||
|
|
||||||
|
Other (expenses) income |
||||||
|
Government grant income |
379,505 | 122,914 | ||||
|
Guarantee income |
614,472 | 238,798 | ||||
|
Guarantee expenses |
(518,141 | ) | (622,192 | ) | ||
|
Interest income |
916,387 | 363,856 | ||||
|
Impairment on deposit for acquisition of a non-consolidated affiliate |
(1,248,804 | ) | - | |||
|
Change in fair value of warrant liabilities |
970,000 | - | ||||
|
Other income |
14,788 | 128,759 | ||||
|
Finance costs |
(5,278,802 | ) | (1,768,339 | ) | ||
|
|
||||||
|
Total other expenses |
(4,150,595 | ) | (1,536,204 | ) | ||
|
|
||||||
|
(Loss) income before income taxes and noncontrolling interest |
(7,228,448 | ) | 793,585 | |||
|
Income taxes |
(325,146 | ) | (521,590 | ) | ||
|
|
||||||
|
Net (loss) income before noncontrolling interest |
(7,553,594 | ) | 271,995 | |||
|
Net loss (income) attributable to noncontrolling interest |
48,282 | (7,832 | ) | |||
|
|
||||||
|
Net (loss) income attributable to Company’s common stockholders |
$ | (7,505,312 | ) | $ | 264,163 | |
|
|
||||||
|
Net (loss) income before noncontrolling interest |
$ | (7,553,594 | ) | $ | 271,995 | |
|
Other comprehensive income |
||||||
|
Foreign currency translation adjustment |
1,716,651 | 1,614,615 | ||||
|
|
||||||
|
Comprehensive (loss) income |
(5,836,943 | ) | 1,886,610 | |||
|
Comprehensive loss (income) attributable to noncontrolling interest |
95,517 | (17,758 | ) | |||
|
|
||||||
|
Comprehensive (loss) income attributable to Company’s common stockholders |
$ | (5,741,426 | ) | $ | 1,868,852 | |
|
|
||||||
|
(Loss) earnings per share - Basic and diluted attributable to Company’s common stockholders |
$ | (0.28 | ) | $ | 0.01 | |
|
|
||||||
|
Weighted average number of shares - Basic and diluted |
26,754,737 | 24,243,716 | ||||
China GengSheng Minerals, Inc.
Consolidated Statements of Cash Flows
|
|
Year ended December 31, | |||||
|
|
2011 | 2010 | ||||
|
Cash flows from operating activities |
||||||
|
Net (loss) income before noncontrolling interest |
$ | (7,553,594 | ) | $ | 271,995 | |
|
Adjustments to reconcile net (loss) income before noncontrolling interest to net cash flows used in operating activities: |
||||||
|
Depreciation |
2,271,268 | 1,624,255 | ||||
|
Impairment of goodwill |
441,089 | - | ||||
|
Impairment of intangible assets |
309,800 | - | ||||
|
Impairment on deposit for acquisition of a non-consolidated affiliate |
1,248,804 | - | ||||
|
Amortization of land use rights |
28,428 | 22,129 | ||||
|
Amortization of intangible assets |
77,450 | 53,818 | ||||
|
Deferred taxes |
208,518 | (123,879 | ) | |||
|
Gain on disposal of intangible assets |
- | (53,818 | ) | |||
|
Loss (gain) on disposal of property, plant and equipment |
4,319 | (72,926 | ) | |||
|
Share-based compensation |
7,965 | 295,600 | ||||
|
Guarantee expenses |
518,141 | 622,192 | ||||
|
Guarantee income |
(614,472 | ) | (238,798 | ) | ||
|
Allowance for doubtful accounts |
1,334,736 | 437,318 | ||||
|
Deferred revenue amortized |
(356,270 | ) | - | |||
|
Change in fair value of warrant liabilities |
(970,000 | ) | - | |||
|
Exchange gain |
(163,440 | ) | - | |||
|
Changes in operating assets and liabilities: |
||||||
|
Restricted cash |
(3,678,875 | ) | (7,548,000 | ) | ||
|
Trade receivables |
(5,205,716 | ) | (5,387,059 | ) | ||
|
Bills receivable |
(3,134,922 | ) | (1,123,429 | ) | ||
|
Other receivables and prepayments |
(1,944,805 | ) | (1,276,659 | ) | ||
| Advances to senior management | (301,907 | ) | - | |||
|
Inventories |
(676,480 | ) | (4,933,135 | ) | ||
|
Trade payables |
3,892,832 | 1,707,545 | ||||
|
Provision of warranty |
110,634 | 68,038 | ||||
|
Bills payable |
7,493,190 | 6,857,459 | ||||
|
Other payables and accrued expenses |
3,524,992 | 947,365 | ||||
|
Income taxes payable |
(405,102 | ) | 275,866 | |||
|
|
||||||
|
Net cash flows used in operating activities |
(3,533,417 | ) | (7,574,123 | ) | ||
|
|
||||||
|
Cash flows from investing activities |
||||||
|
Payments to acquire and deposits for acquisition of land use right, property, plant and equipment |
(13,899,189 | ) | (5,970,774 | ) | ||
|
Proceeds from disposal of property, plant and equipment |
12,983 | 9,021 | ||||
|
Deposit paid for acquisition of a non-consolidated affiliate |
- | (444,000 | ) | |||
|
Net cash flows used in investing activities |
(13,886,206 | ) | (6,405,753 | ) | ||
|
|
||||||
|
Cash flows from financing activities |
||||||
|
Net proceeds from issuance of shares |
9,258,473 | - | ||||
|
Government grant received |
436,586 | - | ||||
|
Advances to senior management |
- | (50,243 | ) | |||
|
Restricted cash |
5,070,605 | 2,516,000 | ||||
|
Proceeds from bank loans |
107,636,911 | 50,986,000 | ||||
|
Repayment of bank loans |
(104,913,150 | ) | (39,072,000 | ) | ||
|
Proceeds from non-interest bearing loans |
4,266,233 | 2,437,067 | ||||
|
Repayment of non-interest bearing loans |
(1,706,840 | ) | (2,934,489 | ) | ||
|
|
||||||
|
Net cash flows provided by financing activities |
20,048,818 | 13,882,335 | ||||
|
Effect of foreign currency translation on cash and cash equivalents |
40,114 | 30,389 | ||||
|
|
||||||
|
Net increase (decrease) in cash and cash equivalents |
2,669,309 | (67,152 | ) | |||
|
Cash and cash equivalents - beginning of year |
925,052 | 992,204 | ||||
|
|
||||||
|
Cash and cash equivalents - end of year |
$ | 3,594,361 | $ | 925,052 | ||
|
|
||||||
|
Supplemental disclosure of cash flow information: |
||||||
|
Cash paid for: |
||||||
|
Interest |
$ | 5,550,951 | $ | 1,768,339 | ||
|
Income taxes |
520,676 | 372,645 | ||||
|
|
||||||
|
Non-cash operating and investing activities:- |
||||||
|
Proceeds from disposal of property, plant and equipment settled by offsetting trade payables |
$ | 99,084 | $ | 279,720 | ||
|
Deposit paid for acquisition of a non-consolidated affiliate settled by offsetting other receivables |
- | 1,776,000 | ||||
|
Proceeds from disposal of intangible assets settled by offsetting other payables |
- | 592,000 | ||||
|
Proceeds from government grant receivables settled by offsetting non-interest-bearing loan from government |
384,648 | - | ||||
|
Warrants issued to investors in connection with the private placement |
$ | 970,000 | $ | - | ||