China GengSheng Minerals Reports 2010 First Quarter Financial Results
GONGYI, China, May 17 /PRNewswire-Asia-FirstCall/ -- China GengSheng Minerals, Inc. (Amex: CHGS) (the "Company"), a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced financial results for the 2010 first quarter ended March 31.
First Quarter Financial Highlights:
-- First quarter sales revenue was approximately $11.9 million, compared
with approximately $12.4 million for the same period of 2009;
-- Refractory product sales increased by 6.0% year-over-year to
approximately $10.4 million;
-- Gross margin increased to 33.5%, compared with 30.3% for the same
period of 2009;
-- Net income was approximately $0.4 million, or $0.02 per share;
-- Non-GAAP net income, after excluding non-cash share-based compensation
expenses of approximately $0.3million, was approximately $0.6 million,
or $0.03 per basic and diluted share;
-- Cash and cash equivalent was approximately $0.5 million, stockholders'
equity, approximately $49.5 million and working capital, approximately
$24.8 million.
First Quarter and Recent Business Highlights:
-- Gained approval for listing on the NYSE AMEX. GengSheng's shares began
trading on the NYSE AMEX Exchange under the symbol "CHGS" on March 4,
2010;
-- Awarded two fracture proppant contracts totaling approximately $1.3
million. Shipments commenced during the beginning of the second quarter
of 2010 and are expected to continue till the end of this year;
-- Awarded two fracture proppant supply contracts totaling approximately
$3.6 million by a U.S.-based distributor. Shipments commenced during
the beginning of the second quarter of 2010 and are expected to
continue through the third quarter of 2010.
Mr. Shunqing Zhang, Chairman and Chief Executive Officer of China GengSheng Minerals, Inc, said, "Our financial results for the first quarter of 2010 were largely impacted by increased costs of raw materials and decreased export demand in our fracture proppant segment due to the global economic conditions. Despite the challenges, I believe that we performed well by increasing our refractory product sales and improving our gross margins. We continue to address the increased demand for the higher-end products and such effort has brought us 6.0% increase in our refractory business revenue and 3.2% increase in the gross margin during the first quarter of 2010 compared with the same period of last year."
"We remain committed to further advance our leadership position in the markets we serve. During the first quarter, we increased our research and development efforts to focus on new product development in our refractories and industrial ceramics segments.
We believe that we can enhance our margin profile as we migrate our product mix among our larger revenue generating business segments to the higher-end products. We are confident that we will achieve a new growth in our less mature business lines."
Mr. Zhang concluded, "As we look ahead, we believe that year 2010 will be another year of growth for GengSheng. We expect that our primary target markets of steel, oil and solar will rebound and are confident that we are well positioned to capitalize the anticipated increase in market demand as growth resumes."
Results of First Quarter of 2010
For the first quarter of 2010, sales revenue was approximately $11.9 million, a decrease of 4.3% compared with approximate $12.4 million in the first quarter of 2009. The decline in revenue was attributable to a decrease in export sales of GengSheng's fracture proppant products. Sales of GengSheng's core refractory products totaled approximately $10.4 million, or 87.5% of sales, compared with approximately $9.8 million in the first quarter of 2009. Sales of fracture proppant products totaled approximately $1.2 million, or 10.1% of sales, compared with approximately $2.5 million for the same period of 2009. Sales of industrial ceramics products totaled approximately $0.3 million, or 2.4% of sales, compared with approximately $0.2 million during the three months ended March 31, 2009.
Gross profit for the three months ended March 31, 2010 was approximately $4.0 million, or 33.5% of revenue, compared with gross profit of approximately $3.8 million or 30.3% of revenue for the first quarter of 2009. The increase in gross profit and gross margin for the first quarter of 2010 were driven by an increase in average sales price of GengSheng's products and an increased revenue contribution from the full-service programs, which carry higher gross margin than individual product sales.
Sales expenses for the first quarter of 2010 were approximately $1.5 million, flat compared with the first quarter of 2009. General and administrative expenses during the first quarter of 2010 were approximately $1.4 million, compared with approximately $1.1 million for the three months ended March 31, 2009. The increase of general and administrative expenses was mainly due to a non-cash share based compensation expense of approximately $0.3 million. Research and development expenses increased to approximately $184,000, from approximately $4,000 in the first quarter of 2009. The increase in research and development expenses was related to expanded product development effort in GengSheng's refractories and industrial ceramics business segments. Total operating expenses for the first quarter of 2010 were approximately $3.1 million, compared with approximately $2.6 million for the same period of 2009.
Income tax expense increased to approximately $163,000, from approximate $46,000 for the first quarter of 2009. The increase in income tax expense was related to an increase in the tax rate of GengSheng's fracture proppant subsidiary, Duesail, which had been exempt from enterprise income tax through the end of 2009. Beginning in 2010, Duesail is subject to an enterprise income tax rate of 12.5%.
Net income attributable to GengSheng's common stockholders was approximately $0.4 million, or $0.02 per share, compared with a net income approximately of $1.0 million, or $0.04 per share, for the same period of 2009. Non-GAAP net income for the three months ended March 31, 2010 was $0.6 million, or $0.03 per basic and diluted share, compared with non-GAAP net income of $1.0 million, or $0.04 per basic and diluted share for the three months ended March 31, 2009. Non-GAAP net income excluding non-cash share-based compensation expense was $0.3 million for the first quarter of 2010 compared with $0 million for the same period of 2009.
GengSheng had cash and cash equivalent totaling approximately $0.5 million, working capital of approximately $24.8 million and stockholders' equity of approximately $49.5 million as of March 31, 2010, compared with cash and cash equivalent of approximately $1.0 million, working capital of approximately $24.6 million and stockholders' equity of approximately $48.9 million on December 31, 2009.
Conference Call
GengSheng' management will hold a conference call today, Monday, May 17, 2010 at 8:00 a.m. EDT (8:00 p.m. BJ time) to discuss first quarter results.
To participate in the call please dial (877) 407-9205, or (201) 689-8054 for international calls, approximately 10 minutes prior to the scheduled start time. The call will also be available as a live, listen-only webcast at http://www.gengsheng.com/english/affair.aspx .
A telephone replay of the call will be available through May 19, 2010. To access the replay, please dial (201) 612-7415; account number 286 and conference ID 350651. Additionally, a webcast archive will be available for a period of one year.
Non GAAP Financial Measures
To supplement Company's condensed consolidated financial statements for the three months ended March 31, 2010 and 2009 presented on a GAAP basis, the Company provided non-GAAP financial information in this release that exclude the impact of non-cash share-based compensation expense related to the common stocks granted to the independent directors and management staff. Company's management believes that these non-GAAP measures, non-GAAP net income and non-GAAP diluted earnings per share, provide investors with a better understanding of how the results relate to Company's current and historical performance. The additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies. Company's management believes that these non-GAAP financial measures are useful to investors because they exclude non-cash expenses that Company's management excludes when it internally evaluates the performance of Company's business and makes operating decisions, including internal budgeting and performance measurement. The foregoing mentioned measures provide a consistent method of comparison to historical periods. Meanwhile, Company's management believes that the non-GAAP measures reflect the essential operating activities of the Company. In addition, the provision of these non-GAAP measures allows investors to evaluate Company's performance using the same methodology and information as used by Company's management. Non-GAAP measures are subject to inherent limitations because they do not include all expenses included under GAAP and they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, Company's management compensates for the limitations by providing the relevant disclosure of the items excluded. A reconciliation of each non-GAAP measures to the nearest GAAP measure is shown in the table below.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS
ENDED MARCH 31, 2010 AND 2009
Three Months Ended March 31,
2010 2009
Income From Operations $865,140 $1,117,362
Add back (Deduct):
Non-Cash Share-based Compensation 261,200 --
Adjusted Income from Operations $1,126,340 $1,117,362
Net Income 387,282 953,618
Add back (Deduct):
Non-Cash Share-based
Compensation 261,200 --
Adjusted Net Income $648,482 $953,618
Diluted EPS 0.02 0.04
Add back (Deduct):
Non-Cash Share-based
Compensation 0.01 --
Adjusted EPS $0.03 $0.04
About China GengSheng Minerals, Inc.
China GengSheng Minerals, Inc. develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics and fracture proppants. 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 200 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, and Henan GengSheng High Temperature Materials Co., Ltd.
For more information about the Company, please visit http://www.gengsheng.com .
To be added to the Company's email distribution for future press releases, please send your request [email protected].
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.
(Financial tables follow)
China GengSheng Minerals, Inc.
Condensed Consolidated Balance Sheets
As of As of
March 31, December 31,
2010 2009
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 520,927 $ 992,204
Restricted cash 14,523,300 15,990,300
Trade receivables, net 38,194,039 36,909,518
Bills receivable 1,413,437 1,953,496
Other receivables and prepayments 8,069,160 7,627,968
Inventories 10,871,351 9,924,413
Deferred tax assets 77,281 56,787
Total current assets 73,669,495 73,454,686
Deposits for acquisition of land use
right, property, plant and equipment 266,662 276,520
Goodwill 441,089 441,089
Intangible asset, net 940,214 953,550
Property, plant and equipment, net 22,445,268 21,980,340
Land use rights, net 928,991 934,981
TOTAL ASSETS $ 98,691,719 $ 98,041,166
LIABILITIES AND EQUITY
Current liabilities:
Trade payables $ 11,674,599 $ 12,327,618
Bills payable -- 1,512,200
Other payables and accrued expenses 5,955,510 4,294,606
Deferred revenue - Government grants 381,420 381,420
Income taxes payable 823,186 313,430
Non-interest-bearing loans 3,700,936 1,520,160
Collateralized bank loans 26,259,300 28,459,800
Deferred tax liabilities 89,244 89,244
TOTAL LIABILITIES 48,884,195 48,898,478
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value
per share; authorized 50,000,000
shares in 2010 and 2009, none
issued and outstanding $ -- $ --
Common stock - $0.001 par value per
share; authorized 100,000,000
shares in 2010 and 2009, issued and
outstanding 24,196,517 shares in
2010 and 24,038,183 in 2009 24,196 24,038
Additional paid-in capital 19,869,086 19,608,044
Statutory and other reserves 7,419,868 7,419,868
Accumulated other comprehensive income 4,345,206 4,344,766
Retained earnings 17,861,095 17,473,813
Total China GengSheng Minerals, Inc.
("the Company") stockholders' equity 49,519,451 48,870,529
NONCONTROLLING INTEREST 288,073 272,159
49,142,688
TOTAL EQUITY 49,807,524
TOTAL LIABILITIES AND EQUITY $ 98,691,719 $ 98,041,166
China GengSheng Minerals, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
Three months ended March 31,
2010 2009
(Unaudited) (Unaudited)
Revenue
Sales $11,861,352 $12,398,010
Cost of goods sold (7,888,058 (8,641,708)
Gross profit 3,973,294 3,756,302
Operating expenses
General and administrative expenses 1,428,972 1,105,080
Research and development expenses 184,233 4,392
Selling expenses 1,494,949 1,529,468
Total operating expenses 3,108,154 2,638,940
Net operating income 865,140 1,117,362
Other income (expenses)
Government grant income 71,032 36,891
Interest income 34,726 8,664
Other income 609 32,966
Finance costs (405,196) (187,236)
Total other expenses (298,829 (108,715)
Income before income taxes and
noncontrolling interest 566,311 1,008,647
Income taxes (163,115) (46,126)
Net income before noncontrolling
interest 403,196 962,521
Net income attributable to
noncontrolling interest (15,914) (8,903)
Net income attributable to
Company's stockholders $387,282 $953,618
Net income before noncontrolling
interest $403,196 $962,521
Other comprehensive income
Foreign currency translation
adjustment 440 (55,933)
Comprehensive income 403,636 906,588
Comprehensive income attributable
to noncontrolling interest (15,914) (8,663)
Comprehensive income attributable to
the Company's common stockholders $387,722 $897,925
Earnings per share - Basic and
diluted attributable to the
Company's common stockholders $0.02 $0.04
Weighted average number of
shares - Basic and diluted $24,108,646 24,038,183
China GengSheng Minerals, Inc.
Condensed Consolidated Statements of Cash Flows
Three months ended March 31,
2010 2009
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income before noncontrolling
interest $403,196 $962,521
Adjustments to reconcile net income
before noncontrolling interest
to net cash used in operating
activities:
Depreciation 357,883 230,101
Amortization of land use right 5,990 6,115
Amortization of intangible assets 13,336 --
Deferred taxes (20,494) 23,110
Provision for doubtful debts (4,251) --
Share-based compensation 261,200 --
Changes in operating assets and
liabilities:
Restricted cash 733,500 (2,490,670)
Trade receivables (1,280,270) 523,995
Bills receivables 540,059 (656,628)
Other receivables and prepayments (210,350) (1,085,158)
Inventories (946,938) (729,885)
Other payables and accrued expenses 1,251,547 (738,865)
Trade payables (653,019) 430,516
Bills payables (1,512,200) 2,783,690
Income tax payable 509,756 22,169
Net cash flows used in operating activities (551,055) (718,989)
Cash flows from investing activities
Payments for deposits of acquisition of
land use right, property, plant and
equipment -- (1,425,328)
Payments for acquisition of property,
plant and equipment (812,953) --
Net cash flows used in investing
activities (812,953) (1,425,328)
Cash flows from financing activities
Restricted cash 733,500 --
Proceeds from bank loans 6,601,500 6,592,950
Repayment of bank loans (8,802,000) --
Repayment to a director -- (1,356,952)
Proceed from non-interest-bearing
loans 2,204,167 --
Repayment of non-interest-bearing
loans (23,391) (219,765)
Government grant received 178,974 --
Net cash flows provided by financing
activities 892,750 5,016,233
Effect of foreign currency translation
on cash and cash equivalents (19) (415)
Net (decrease) increase in cash and
cash equivalents (471,277) 2,871,501
Cash and cash equivalents - beginning
of period 992,204 955,732
Cash and cash equivalents - end of
period $520,927 $3,827,233
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $239,514 $76,214
Income taxes $-- $--
For more information, please contact:
The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: +1-212-481-2050
Email: [email protected]
China GengSheng Minerals, Inc.
Ms. Wendy Sun
Finance Manager and Investor Relations
Tel: +86-159-3870-8666
Email: [email protected]
Mr. Shuai Zhang
Investor Relations
Email: [email protected]
SOURCE China GengSheng Minerals, Inc.
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