2014

China Gerui Advanced Materials Group Limited Announces Third Quarter 2013 Results and Reiterates Full-Year 2013 Revenue Guidance

ZHENGZHOU, China, Nov. 27, 2013 /PRNewswire-FirstCall/ -- China Gerui Advanced Materials Group Limited (NASDAQ: CHOP) ("China Gerui," or the "Company"), a leading high-precision, cold-rolled steel producer in China, today announced its unaudited financial results for the three and nine months ended September 30, 2013.

"Although the third quarter's results were below expectations due to the continued challenging macroeconomic conditions impacting China's steel sector, we are confident that our previously issued guidance for the full fiscal year ended 2013 will be met," commented Mr. Mingwang Lu, Chairman and Chief Executive Officer of China Gerui. "We continue to be highly attentive to market conditions and we are being especially disciplined and strategic in terms of how we deploy our specialized steel lines so as to balance our well-earned market share with overcapacity in the sector resulting from intense competition. We continue to be well-positioned to bring to market a portfolio of new steel products in a strategic manner that we believe will optimize our return on investment."

"Our revenue guidance for the full fiscal year 2013 was $165 million to $170 million and we expect our financial results for the year to fall within these parameters. Despite our third quarter results which reflected lower margins than that recorded historically, stemming from overcapacity that negatively impacted pricing in the sector, and which substantially lowered our average selling price, we believe that steel pricing could be at an inflection point due to likely changing fundamentals in our sector. In addition, based on the Company's preliminary operating results for the fourth quarter 2013, we believe that market demand for our products is gradually ramping, although it may still be some time before we see substantial margin improvement."

"We achieved another quarter of positive cash flow with $0.7 million in EBITDA with reasonably stable volume given this highly challenging environment. Revenue from the sale of approximately 8,000 tons of cold-rolled steel was not recognized in the third quarter as two customers delayed their third quarter pickup which will now fall into the fourth quarter. The China Iron and Steel Association ("Association") reported that for the first nine months of 2013, its members reported an average gross margin of only 0.41%while for the month of September, 34% of members of the Association reported net losses due to decreasing steel prices."

"The Company estimates that the utilization of its wide- and narrow-strip cold-rolled steel capacity was 44% in the third quarter of 2013 compared with approximately 47% during the second quarter of 2013. The Company's utilization of its chromium-plating production lines was approximately 38% in the 2013 third quarter compared to 43% during the second quarter of 2013. Based on the preliminary production schedule for the fourth quarter of 2013, the Company will see overall capacity utilization at approximately 65% on a blended basis, more similar to how the Company performed in the first quarter of 2013. The Company plans to deploy its more specialized steel lines as market conditions dictate."

"Our investment thesis continues to be strong as we offer a greater range of cold-rolled steel products to the market that can compete with higher-priced imports, and we can now provide steel solutions to new customers we could not service before. Our more comprehensive steel product line differentiates us from many smaller steel producers who do not have the technology, financial resources, or customer relationships to effectively compete with us," concluded Chairman Mingwang Lu

Third Quarter 2013 Results

Revenue decreased 44.9% to $30.9 million in the third quarter of 2013 from $56.1 million in the third quarter of 2012. The decrease in revenue was primarily due to a 3.4% decrease in the Company's average selling price to $674 per ton for the third quarter of 2013 as compared to an average selling price of $698 for the third quarter of 2012 as well as a 43.0% decrease in sales volume to approximately 45,797 tons for the third quarter of 2013 as compared to approximately 80,386 tons for the same quarter of 2012.   

Gross profit decreased to $0.7 million in the third quarter of 2013 from $8.8 million in the same quarter of 2012. Gross margin was 2.4% in the third quarter of 2013 compared to 15.7% in the third quarter of 2012. The decrease in gross profit compared with a year ago was due to lower sales as the economic slowdown in China continued and domestic consumption declined in the third quarter of 2013. Excess capacity and reduced steel demand continued to create the intense competition and pricing pressures currently in the marketplace during the quarter.

The operating loss was $2.3 million in the third quarter of 2013 compared to operating income of $5.9 million for the third quarter of 2012. The decrease in operating income in the third quarter of 2013 was primarily due to a 91.5% decrease in gross profit.

Net loss was $4.4 million in the third quarter of 2013, or nil per fully diluted share, compared to a net profit of $2.4 million, or $0.04 per share in the third quarter of 2012. 

Non-GAAP EBITDA was $0.7 million in the third quarter of 2013, or 2.3% of revenue, compared to $8.7 million, or 15.4% of revenue, in the third quarter of 2012. Non-GAAP EBITDA is defined as earnings before net interest expense, taxes, depreciation, and amortization incurred in the third quarter of fiscal year 2013.*

* Please see the section below entitled "Use of Non-GAAP Adjusted Financial Measures" and the reconciliation table at the end of this press release for an explanation and quantitative comparison of the non-GAAP measures used in this press release to their GAAP equivalents.

Nine Months 2013 Results

Revenue for the nine months ended September 30, 2013 was $119.6 million, a decrease of 40.7% as compared to $201.6 million from the nine months ended September 30, 2012. Gross profit was $9.5 million, down 81.1% from $50.1 million in the nine months ended September 30, 2012. Gross margin was 7.9% compared to 24.9% in the same period of 2012. Non-GAAP EBITDA was $9.8 million adjusting for non-cash stock compensation expense, down 80.5% from $50.3 million in the same period of 2012. 

Financial Condition

As of September 30, 2013, the Company had $192.9 million in unrestricted cash, $26.9 million in current certificates of deposit, and an additional $156.7 million in restricted cash, as compared to $228.9 million in unrestricted cash, $16.4 million in current certificates of deposit and an additional $145.4 million in restricted cash as of December 31, 2012. The Company's short-term debt consisted of notes payable, term loans and the short-term portion of the secured long-term loan, totaled $348.6 million at September 30, 2013, compared to $317.0 million as of December 31, 2012. The Company had $14.6 million in a secured long-term loan, net of current portion. Shareholders' equity was $304.3 million at September 30, 2013 as compared to $330.1 million as of December 31, 2012. Net cash used in operating activities for the first nine months ended September 30, 2013 was $25.5 million compared with $29.4 million of net cash flow used during the first nine months of 2012.

2013 Financial Guidance Update

The Company is pleased to reiterate its full year 2013 revenue guidance in the range of $165 million to $170 million given the currently challenging market conditions. These conditions are characterized primarily by the volatility of raw material costs, overcapacity in the steel sector and slower than anticipated price recovery for premium processed steel. However, the Company may adjust such guidance as changing macroeconomic conditions and operational and competitive challenges dictate.   

Recent Developments

Since the launch of the share repurchase program in April 2011, as of September 30, 2013 the Company had repurchased a total of 2,010,918 ordinary shares at an average price of $3.06 per share for a total repurchase price of approximately $6.2 million. Approximately $3.8 million remains from the $10.0 million for the share repurchase program as authorized by the Company's Board of Directors.

Industry and Business Update

The Chinese economy grew 7.8% in the third quarter, its fastest pace of the year and in-line with current expectations. The third quarter's GDP kept China on-track to achieve the government's growth target of 7.5% with GDP for the first nine months at 7.7%. 

The central government is taking actions to encourage consolidation in the steel industry to create a more balanced steel production and price environment to alleviate the current market conditions over time. Therefore, the Company believes that smaller steel companies or those with older technologies may be forced to merge or cease operations.  

At the Third Plenary Session of the Eighteenth Central Committee, the central government has determined to further open up a number of key domestic industries including steel-making, chemical and automobile manufacturing to foreign capital. This demonstrates the Chinese government's resolution to deepen reform and transform key domestic industries by leveraging foreign capital. Introducing foreign capital to the traditionally capital-intensive steel industry would help further more of a market-driven steel environment in China resulting in enhanced competiveness of domestic players without traditional Government support, an increased implicit technological content of steel products and an improved overall balanced demand and supply equation.

As the steel processing market in China has continued to be depressed for nearly two years, forcing many companies competing on price to incur heavy losses or go out of business, beginning in the fourth quarter of 2013 China Gerui has determined to revise its strategy and act to more aggressively fulfill customer orders. This will enable the Company to solidify its market share, although profit margins will likely continue to be mediated in the short term. 

China Gerui is also planning to work with potential customers to better improve their production processes in order to utilize the Company's new laminated steel products thereby optimizing more throughput. To sustain a key competitive edge, the Company will continue to invest in R&D and ramp up its new product pipelines as market conditions dictate. China Gerui also plans to continue to expand its international sales in 2014 with the addition of international sales representatives, a global corporate business-to-business marketing and advertising strategy and the formation of an internal strategy and business development group. As we have previously disclosed, the Company also continues to explore strategic, cost-effective opportunities through the retention of Cambelle-Inland that will complement China Gerui's long-term growth strategy. 

"The third quarter saw an improvement in investment in real estate and fixed assets as well as relatively steady demand from certain industries such as automotive and heavy-duty equipment. We are further positioning China Gerui to become a substantial player in the global steel industry with a much larger global customer base through our comprehensive product mix and potential future opportunistic acquisitions to further our diversification and quickly build market share. To support our revised strategy of being more aggressive in the marketplace in order to sustain our market position and expand internationally, we have bolstered our sales and marketing efforts to expedite this strategy in 2014. In addition, by improving our production efficiency we expect to become an even more effective competitor and benefit from the next recovery in the Chinese steel market," Mr. Lu concluded.

Conference Call Information

The Company will also host a conference call at 8:00 am EST (9:00 pm Beijing Time) on Wednesday, November 27, 2013.

Listeners may access the call by dialing +1 (877) 407-8133 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (201) 689-8040. A replay of the conference call will be available for 14 days starting from 12:00 pm EST on Wednesday, November 27, 2013. 

To access the replay, dial +1 (877) 660-6853. International callers should dial at +1 (201) 612-7415. The conference ID is 13573025.

A live and archived webcast of the call will be available on the Company's website at http://www.geruigroup.com/Investors.html. To listen to the live webcast, please go to the Company's website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software.

2013 Second Quarter and First Six Months Reclassification of Non-Cash Financial Information

On February 26, 2013, the Company's subsidiary, Henan Green, entered into an equity/asset transfer agreement to acquire Zhengzhou Company via Henan Green. Zhengzhou Company owns a land use right totaling 24.94 acres, among which 6.69 acres of land has been leased to Henan Green. The Company accounted for this deal as an asset purchase and fully settled the payment on June 30, 2013, but the share transfer of Zhengzhou Steel and the land use right transfer are still in process.

The predecessor's cost of US$17.4 million was included as part of the land use right, amortized over the life of the land use right and the difference was recorded in retained earnings as a dividend paid because it was acquired from a related party.

(in U.S. dollars)

As stated for the Six Months
Ended June 30, 2013

After reclassification for the Six Months

Ended June 30, 2013




Loss before income tax

$(569,788)

$(771,456)

EPS

Nil

Nil

Dividend Paid

Nil

$26,186,357

Retained earnings

$162,536,868

$136,148,843

The following table summarizes the carryover of the historical cost of the land use right of Zhengzhou Company at the acquisition date.

Land use right

$17,444,274

Cash consideration

$43,630,631

Difference

$26,186,357

Use of Non-GAAP Financial Measures

This earnings release includes the use of non-GAAP EBITDA, which are financial measures that are not defined by U.S. generally accepted accounting principles, or U.S. GAAP. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in the statement of income, balance sheet, or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Pursuant to the requirements of Regulation G, the Company has included with this press release a table which includes a reconciliation of non-GAAP EBITDA to the most directly comparable respective U.S. GAAP financial measures. Non-GAAP EBITDA is defined in this earnings release as earnings before interest, taxes, depreciation, and amortization that were incurred in the third quarter of 2013. The Company's management believes that the presentation of these non-GAAP financial measures provides useful information regarding the Company's results of operations because it assists in analyzing and benchmarking the performance and value of the Company's business. The Company's calculation of non-GAAP EBITDA may not be consistent with similarly titled measures of other companies.

About China Gerui Advanced Materials Group Limited

China Gerui Advanced Materials Group Limited is a leading niche and high value-added steel processing company in China. The Company produces high-end, high-precision, ultra-thin, high- strength, cold-rolled steel products that are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. China Gerui's products are not standardized commodity products. Instead, they are tailored to customers' requirements and subsequently incorporated into products manufactured for various applications. The Company sells its products to domestic Chinese customers, with an emerging presence in international markets, in a diverse range of industries, including the food packaging, telecommunication, electrical appliance, and construction materials industries. For more information, please visit http://www.geruigroup.com.

Safe Harbor Statement

Certain of the statements made in this press release are "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, capital, ownership or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "could," "intend," "target" and other similar words and expressions of the future.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our Amendment No. 1 to annual report on Form 20-F for the year ended December 31, 2012 and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the SEC, including through the SEC's Internet website at http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made.

Company Contact:

IR Contacts:


Email: investors@geruigroup.com

Vivian Chen

Kevin Theiss

Website: www.geruigroup.com

Managing Director

Account Director


Grayling

Grayling


Phone: 646-284-9427

Phone: 646-284-9409


Email: vivian.chen@grayling.com

Email: kevin.theiss@grayling.com

 

- Financial Tables Follow -

 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)



(Unaudited)




September 30, 2013


December 31, 2012

Assets








Current assets




    Cash

$192,945,959


$228,861,009

    Certificates of deposit

26,906,862


16,372,128

    Restricted cash

156,692,625


145,413,726

    Accounts receivable, net

5,335,510


2,276,153

    Notes receivable

119,281


433,379

    Inventories

48,374,321


22,762,545

    Prepaid purchases

76,660,783


76,268,597

    Prepaid expenses

1,527,993


382,569

    Other receivables, net

10,901,012


2,270,073





Total current assets

519,464,346


495,040,179





Non-current assets




    Property, plant and equipment, net

135,958,517


134,110,657

    Land use right, net

30,779,799


13,625,738

    Deposit on acquisition of future land use right

-


24,076,660

    Deposit on acquisition of property, plant and equipment

2,343,301


266,312

    Other receivable

3,084,483


3,039,835

    Certificates of deposit

3,267,973


3,210,221

Total non-current assets

175,434,073


178,329,423





Total assets

$694,898,419


$673,369,602





Liabilities and stockholders' equity








Current Liabilities




    Accounts payable

$2,917,312


$2,279,246

    Notes payable

293,246,732


259,546,395

    Term loans

48,692,810


57,462,962

    Secured long-term loan, current portion

6,632,179


-

    Land use right payable

1,444,848


1,419,314

    Income tax payable

333,180


5,140,306

    Customers deposits

17,658,941


11,635,999

    Accrued liabilities and other payables

5,055,801


5,818,060





Total current liabilities

375,981,803


343,302,282





Non-current liabilities




    Secured long-term loan, net of current portion

$14,609,651


-





Total non-current liabilities

$14,609,651


-





Total liabilities

$390,591,454


$343,302,282





Stockholders' equity








Common stock,




    Common stock, 100,000,000 shares authorized with no par     
    value;




         59,823,730 and 59,823,730 shares issued,

         59,522,910 and 59,561,899 shares outstanding as of

         September 30, 2013 and December 31, 2012, respectively

140,418,118


140,418,118

    Additional paid-in capital

5,011,589


4,978,698

        Treasury stock, at cost, 300,820 and 261,831 shares,

        as of September 30, 2013 and December 31, 2012,
        respectively

(498,799)


(414,063)

    Retained earnings

131,776,484


163,276,046

   

   Accumulated comprehensive income

27,599,573


21,808,521





Total stockholders' equity

304,306,965


330,067,320





Total liabilities and stockholders' equity

$694,989,419


$673,369





 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
CONSOLIDATED STATEMENTS OF (LOSS) / INCOME (UNAUDITED)

(IN U.S. DOLLARS)




For the Three Months Ended  
September 30,


 For the Nine Months Ended
September 30,



2013


2012


2013


2012










 Revenue


$     30,927,996


$       56,123,028


$  119,617,291


$  201,596,558

 Cost of revenue


(30,178,989)


(47,331,341)


(110,140,847)


(151,503,911)

 Gross Profit


749,007


8,791,687


9,476,444


50,092,647

 Operating expenses:









     General and administrative
        expenses


(2,618,166)


(2,548,672)


(7,553,542)


(7,429,203)

     Selling and marketing
        expenses


(446,488)


(374,818)


(1,254,501)


(988,615)

 Total operating expenses


(3,064,654)


(2,923,490)


(8,808,043)


(8,417,818)

 Operating (loss)/income


(2,315,647)


5,868,197


668,401


41,674,829

 Other income and (expense):









     Interest income


1,369,269


1,233,910


3,451,426


2,484,739

     Interest expenses


(3,490,793)


(3,105,412)


(9,430,475)


(6,164,788)

     Sundry income


36,500


21,310


138,521


204,958

(Loss)/Income before income taxes


(4,400,671)


4,018,005


(5,172,127)


38,199,738

Income tax expense


28,312


(1,636,419)


(141,078)


(11,532,267)










Net (loss) / income


$    (4,372,359)


$         2,381,586


$   (5,313,205)


$    26,667,471

Earnings per share









    - Basic


 $               Nil


$                  0.04


 $               Nil


$             0.46










    - Diluted


 $               Nil


$                  0.04


 $               Nil


$             0.46










Weighted average common shares outstanding









    - Basic


59,522,910


57,935,604


59,546,926


58,131,188










    - Diluted


59,522,910


57,935,604


59,546,926


58,131,188

 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN US DOLLARS)




For The Nine Months Ended

September 30,



2013


2012






Cash flows from operating activities:










Net (loss) / income


$(5,313,205)


$26,667,471






Adjustments to reconcile net (loss) / income to net

    cash provided by operating activities:





Depreciation of property, plant and equipment


8,422,157


8,129,037

Amortization of land use right


554,520


246,801

Stock-based compensation


32,891


-






Changes in assets and liabilities:





Accounts receivable, net


(2,998,029)


2,679,379

Notes receivable, net


319,722


165,625

Inventories


(25,032,121)


(973,858)

Prepaid expenses


(861,582)


(3,822,113)

Prepaid purchases


973,285


(50,790,330)

Other receivable


(4,450,344)


219,656

Accounts payable


593,031


(4,569,113)

Income tax payable


(4,866,521)


952,863

Customers deposit


5,774,358


(9,216,363)

Accrued liabilities and other payables


1,354,381


896,983






Net cash used in operating activities


(25,497,457)


(29,413,962)






Cash flows from investing activities:










Cash paid for property, plant and equipment


(9,494,339)


(5,887,409)

Advance to unrelated third parties


(5,678,030)


(3,686,625)

Repayment of advance to unrelated third parties


774,455


5,233,632

Repayment of advance to related party


310,496


-

Repayment of advance from unrelated third party


(1,668,035)


-

Investment in certificates of deposit


(10,171,059)


(12,497,034)

Changes in restricted cash


(8,604,390)


(47,406,917)






Net cash used in investing activities


(34,530,902)


(64,244,353)











Cash flows from financing activities:





Repayment of term loans


(37,327,967)


(31,638,061)






Proceeds from term loans


27,590,236


39,547,576

Proceeds from secured long-term loan


21,098,416


-

Proceeds from notes payable


458,268,956


403,068,892

Repayments from notes payable


(429,433,913)


(333,069,683)

Purchase of treasury stock


(84,736)


(1,140,611)

Dividend paid


(19,214,984)


-






Net cash provided by financing activities


20,896,008


76,768,113






Net decrease in cash


(39,132,351)


(16,890,202)






Effect on change of exchange rates


3,217,301


217,942






Cash as of January 1


228,861,009


246,600,917

Cash as of September 30


$192,945,959


$229,928,657






Supplemental disclosures of cash flow information:










Cash paid during the period for:





                  Interest paid


$9,357,242


$6,258,243

                  Income tax paid


$5,007,600


$10,579,405






Net cash payment during the period for:





                  Prepaid deposit of land use right as part of the
                  dividend paid to acquire land use right from related
                  company


$6,971,373


-

 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

RECONCILIATION OF NON-GAAP FINANCIAL DATA (UNAUDITED)

(IN US DOLLARS)



Non-GAAP EBITDA


Third Quarter Ended
September 30,


2013

2012




Net (Loss) / Income, GAAP amount per consolidated statement of income

$(4,372,359)

$2,381,586

Interest income

(1,369,269)

(1,233,910)

Interest expenses

3,490,793

3,105,412

Income tax expense

(28,312)

1,636,419

Depreciation of property, plant and equipment

2,819,417

2,683,372

Amortization of land use right

184,581

82,139

Non-GAAP EBITDA

$724,851

$8,655,018




Non-GAAP EBITDA


Nine Months Ended
September 30,


2013

2012




Net (Loss) / Income, GAAP amount per consolidated statement of income

$(5,313,205)

$26,667,471

Interest income

(3,451,426)

(2,484,739)

Interest expenses

9,430,475

6,164,788

Income tax expense

141,078

11,532,267

Depreciation of property, plant and equipment

8,422,157

8,129,037

Amortization of land use right

554,520

246,801

Stock based compensation

32,891

-

Non-GAAP EBITDA

$9,816,490

$50,255,625

 

2013 Second Quarter and First Six Months Reclassified Financials

 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)



(Unaudited)




June 30, 2013


December 31, 2012

Assets








Current assets




    Cash

$       203,573,315


$         228,861,009

    Certificates of deposit

27,971,127


16,372,128

    Restricted cash

169,845,051


145,413,726

    Accounts receivable, net

7,528,934


2,276,153

    Notes receivable

-


433,379

    Inventories

24,598,947


22,762,545

    Prepaid purchases

120,454,584


76,268,597

    Prepaid expenses

950,389


382,569

    Other receivables

1,049,489


2,270,073





Total current assets

555,971,836


495,040,179





Non-current assets




    Property, plant and equipment, net

138,983,868


134,110,657

    Land use right, net

30,921,978


13,625,738

    Deposit on acquisition of future land use right

-


24,076,660

    Deposit on acquisition of property, plant and equipment

790,087


266,312

    Other receivable

3,075,738


3,039,835

    Certificates of deposit

3,258,708


3,210,221





Total non-current assets

177,030,379


178,329,423





Total assets

$       733,002,215


$         673,369,602





Liabilities and stockholders' equity








Current Liabilities




    Accounts payable

$         17,067,680


$             2,279,246

    Notes payable

315,878,059


259,546,395

    Term loans

61,589,598


57,462,962

    Land use right payable

1,440,751


1,419,314

    Income tax payable

1,771,519


5,140,306

    Customers deposits

20,467,262


11,635,999

    Accrued liabilities and other payables

6,786,234


5,818,060









Total current liabilities

425,001,103


343,302,282





Total liabilities

425,001,103


343,302,282









Stockholders' equity




Common stock, 100,000,000 shares authorized with no par value;

         59,823,730 and 59,823,730 shares issued,

         59,522,910 and 59,561,899 shares outstanding as of

         June 30, 2013 and December 31, 2012, respectively

140,418,118


140,418,118

    Additional paid-in capital

5,011,589


4,978,698

    Treasury stock, at cost, 300,820 and 261,831 shares,

        as of June 30, 2013 and December 31, 2012, respectively

(498,799)


(414,063)

    Retained earnings

136,148,843


163,276,046

    Accumulated comprehensive income

26,921,361


21,808,521









Total stockholders' equity

308,001,112


330,067,320





Total liabilities and stockholders' equity

$       733,002,215


$         673,369,602

 

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(IN US DOLLARS) (UNAUDITED)











 For the Three Months Ended


 For the Six Months Ended



 June 30,


 June 30,



2013


2012


2013


2012










 Revenue

$

43,078,588

$

76,783,963

$

88,689,295

$

145,473,530










 Cost of revenue


(39,557,743)


(56,975,825)


(79,961,858)


(104,172,570)










 Gross Profit


3,520,845


19,808,138


8,727,437


41,300,960










 Operating expenses:









     General and administrative
            expenses


(2,532,275)


(2,511,170)


(4,935,376)


(4,880,531)

     Selling and marketing
            expenses


(73,666)


(506,711)


(808,013)


(613,797)

 Total operating expenses


(2,605,941)


(3,017,881)


(5,743,389)


(5,494,328)










 Operating income


914,904


16,790,257


2,984,048


35,806,632










 Other income and 

     (expense):









     Interest income


845,618


624,578


2,082,157


1,250,829

     Interest expenses


(2,580,151)


(2,028,459)


(5,939,682)


(3,059,376)

     Sundry income


3,423


24,911


102,021


183,648










(Loss)/Income before

     income taxes


(816,206)


15,411,287


(771,456)


34,181,733










Income tax expense


(29,566)


(5,136,010)


(169,390)


(9,895,848)










Net (loss) / income

$

(845,772)

$

10,275,277

$

(940,846)

$

24,285,885










Earnings per share









    - Basic

$

 Nil

$

0.18

$

              Nil

$

0.42










    - Diluted

$

                Nil

$

0.18

$

               Nil

$

0.42










Weighted average common

shares outstanding









    - Basic


59,556,396


58,203,179


59,559,133


58,230,054










    - Diluted


59,556,396


58,203,179


59,559,133


58,230,054














CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

 (IN US DOLLARS) (UNAUDITED)




















For The Six Months Ended









2013


2012












Cash flows from operating activities:


















Net (loss) / income




$

(940,846)


$      24,285,885












Adjustments to reconcile net (loss) / income to net

    cash provided by operating activities:






Depreciation of property, plant and equipment



5,602,740


5,445,665

Amortization of land use right




369,939


164,662

Amortization of intangible asset




-


2,730

Stock-based compensation





32,891


-












Changes in assets and liabilities:







Accounts receivable, net





(5,181,508)


2,688,177

Notes receivable, net





436,815


75,515

Inventories






(1,482,042)


723,341

Prepaid expenses





(1,074,146)


(2,240,101)

Prepaid purchases





(42,729,770)


(30,503,908)

Other receivable





147,453


143,083









Accounts payable





14,649,698


26,426,165

Income tax payable





(3,422,061)


3,329,166

Customers deposit





8,594,318


(5,288,776)

Accrued liabilities and other payables




2,538,767


(276,963)












Net cash (used in) / provided by operating activities



(22,457,752)


24,974,641












Cash flows from investing activities:







Cash paid for property, plant and equipment



(7,855,584)


(1,646,177)

Payment of purchases intangible asset




-


(16,435)

Advance to unrelated third parties




-


(3,689,485)

Repayment of advance to unrelated third parties



772,012


5,237,692

Repayment of advance to related party




315,177


-

Repayment of advance from unrelated third party



(1,617,835)


-









Investment in certificates of deposit




(11,271,457)


(4,432,764)

 

Changes in restricted cash





(22,077,780)


(28,048,733)












Net cash used in investing activities




(41,735,467)


(32,595,902)












Cash flows from financing activities:







Repayment of term loans





(14,560,515)


(14,248,171)









Proceeds from term loans





17,796,185


17,414,432








Proceeds from notes payable




313,644,821


247,601,558

Repayments from notes payable




(261,603,922)


(204,144,635)

Purchase of treasury stock





(84,736)


(571,496)









Dividend paid





(19,214,984)


-












Net cash provided by financing activities



35,976,849


46,051,688












Net (decrease)/increase in cash





(28,216,370)


38,430,427












Effect on change of exchange rates




2,928,676


(2,191,610)












Cash as of January 1





228,861,009


246,600,917












Cash as of June 30





$    203,573,315


$    282,839,734












Supplemental disclosures of cash flow information:

















Cash paid during the period for:







  Interest paid






$        5,895,801


$        3,153,604

  Income tax paid






$        3,591,451


$        6,566,682

Net cash payment during the period for:





Prepaid deposit of land use right as part of the dividend paid to

   acquire land use right from related company   


$        6,971,373


$                       -

 

CHINA GERUI ADVANCED MATERIAL GROUP LIMITED

RECONCILIATION OF NON-GAAP FINANCIAL DATA (UNAUDITED)

(IN US DOLLARS)



Non-GAAP EBITDA


Second Quarter Ended June 30,


2013

2012

Net (Loss) / Income, GAAP amount per consolidated statement of income

$(845,772)

$10, 275,277

Interest income

(845,618)

(624,578)

Interest expenses

2,580,151

2,028,459

Income tax expense

29,566

5,136,010

Depreciation of property, plant and equipment

2,818,472

2,724,266

Amortization of land use right

286,288

82,110

Non-GAAP EBITDA

$4,023,087

$19,621,544

SOURCE China Gerui Advanced Materials Group Limited



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http://www.geruigroup.com/Investors.html

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