HOHHOT, China, Nov. 11 /Xinhua-PRNewswire/ -- Gold Horse International, Inc., (OTC Bulletin Board: GHII) ("Gold Horse" or "the Company"), a multifaceted business group that controls and operates a construction company, real estate development business and a hotel in Inner Mongolia, China, today provided its financial results for the three months ended September 30, 2008.
First Quarter Highlights
-- Net revenue increased 204.4% year-over-year to $29.4 million
-- Gross profit increased 131.1% year-over-year to $4.5 million, gross
margin was 15.2%
-- Operating income increased 237.8% year-over-year to $4.0 million
-- Net income increased 224.4% year-over-year to $2.4 million, or $0.04
per fully diluted share
-- Excluding non-cash debt financing expenses, adjusted net income rose
285.3% to $2.8 million, or $0.05 per fully diluted share
-- Awarded the Lanyu Garden No. 3 Residential Building project in
September 2008 with expected net profit of $800,000
-- Secured requisite approvals and certifications to move forward
with joint venture agreement to build a 45MW wind farm in Inner
Mongolia
First Quarter Results
For the first quarter of fiscal year 2009 ending on September 30, 2008, net revenue was $29.4 million, up 204.4% from $9.7 million in the same quarter of 2007. Construction revenue was $28.4 million, or 96.4% of net revenue, up from $7.9 million, or 81.5% of net revenue, for the three months ended September 30, 2007. The significant increase was mainly due to three major construction projects that began in April 2008 and are expected to be completed in November 2008: Riverbank Garden Community (phase two), Ai Bo Gardens residential apartment project and the Tian Fu Garden residential project (phases one and two). Revenue from the hotel segment was $0.8 million, relatively unchanged from the same quarter prior year, and revenue from the real estate segment was $0.2 million, down from $0.9 million a year ago due to the successful completion and sale of all real estate projects.
"We are pleased to report strong results for the first quarter of fiscal 2009, which reflect the continued success of our management team in securing and executing construction projects and maintaining excellent government and customer relationships," commented Mr. Liankuan Yang, chairman and CEO of Gold Horse International, Inc. "After announcing strong year-end results for fiscal year 2008 in October, Gold Horse continues to thrive as a leading construction and engineering company in the rapidly growing Inner Mongolia region. Given our regional focus, we are relatively insulated from the volatile conditions associated with the global financial market crisis and have an active pipeline of new construction projects available for bid."
Gross profit for the quarter was $4.5 million, up 131.1% from $1.9 million for the same quarter last year. Gross margin was 15.2%, down from 20.0% compared to the same period prior year. The decrease in gross margin was primarily due to the increased contribution of construction segment during the first quarter of fiscal 2009, as this segment produces a lower gross margin than the real estate segment, thereby reducing overall gross margin, and the rising costs of building supplies and labor costs for the construction segment.
Operating expenses for the quarter were $0.4 million, or 1.4% of net revenue, down 42.8% from $0.7 million, or 7.6% of net revenue, a year ago. While the Company incurred higher depreciation and amortization expenses and increased salaries and benefits, operating expenses decreased overall due to a $0.2 million recovery of bad debt expense and lower hotel operating expenses.
Operating income for the quarter was $4.0 million, up 237.8% from $1.1 million for the same period prior year. Operating margin was 13.7% for the quarter, compared to 12.4% a year ago.
Net income for the quarter was $2.4 million, or $0.04 per fully diluted share, compared to net income of $0.7 million, or $0.01 per fully diluted share, for the same period prior year. Excluding non-cash debt financing expenses, adjusted net income was $2.8 million, or $0.05 per fully diluted share, for the quarter.
Financial Condition
As of September 30, 2008, Gold Horse had $1.4 million in cash and cash equivalents, $17.5 million in working capital and a current ratio of 3.6 to 1. Long-term debt was $4.5 million, excluding the current portion, and shareholders' equity stood at $24.2 million, up from $21.8 million as of June 30, 2008. Cash used in operating activities during the quarter was $2.5 million, and was used to fund accounts receivable and construction in progress for the Inner Mongolia Electrical Vocational Technical School, which was completed in October 2008 and will begin generating annual lease income of $685,000 for Jin Ma Real Estate in the second quarter of fiscal 2009. The Company has historically funded its capital expenditures and ongoing development projects from working capital. The Company intends to meet its liquidity requirements, including capital expenditures related to the purchase of land for the development of our future projects, through cash flow provided by operations and additional funds raised by future financings. Upon acquiring land for future development, the Company intends to raise funds to develop the projects by obtaining mortgage financing from local banking institutions.
Recent Events
In October 2008, Jin Ma Construction began construction of the 28,000 square-meter Lanyu Garden No. 3 Residential Building Project. The Company expects $800,000 in net profit from this project, which is scheduled for completion in December 2009.
During the quarter, Jin Ma Construction received the requisite approvals and certifications to move forward with a joint venture agreement the Company signed in May 2008 with two development-stage companies to construct a wind-power plant and the construction of a manufacturing facility to build wind power generator modules to be used at the wind power plant in Inner Mongolia. Gold Horse has been pursuing financing sources to meet the initial $30 million capital requirement to build the wind farm and power plant which is expected to cost approximately $70 million. However, the availability of capital has been limited by the current global economic crisis. The Company intends to utilize internally generated resources, if necessary, to begin construction during the second half of calendar 2009 as scheduled. Jin Ma has no plans to begin the construction or financing of the manufacturing facility at this time which is estimated to cost $30 million.
Business Outlook
For fiscal year 2009, Gold Horse expects to generate combined revenue of approximately $90.0 million from its construction, hotel management and real estate development operations. The majority of revenue is expected to come from the construction division in fiscal 2009 due to the number of projects currently under construction and management's strategy of selectively bidding on profitable projects from the number of available projects for bid. The hotel management segment is expected to remain consistent with fiscal 2008. While the real estate segment is not expected to be a major growth driver in 2009, the recent interest rate cuts and other actions from the Chinese central bank could rejuvenate this segment over time by making real estate property more affordable for both developers and consumers.
"We began fiscal 2009 with solid growth in revenue and net income. Our construction segment continues to execute on our existing projects and recently commenced building the Lanyu Garden project. We have also completed the Inner Mongolia Electrical Vocational Technical School, which will generate a stable source of lease income for years to come," Mr. Yang said. "With a number of projects scheduled for completion in November, we are actively pursuing new construction projects using discretion in selecting the most profitable and attractive projects in order to provide the best possible return and maximize value to our shareholders."
Conference Call
The Company will host a conference call at 9:00 AM Eastern Standard Time on Tuesday, November 11, 2008 to discuss results for the quarter ended September 30, 2008. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial 617-896-9871. The passcode for the call is 140-766-19. If you are unable to participate in the call at this time, a replay will be available for 14 days starting from Thursday, November 11 at 11:00 AM Eastern Standard Time. To access the replay, dial 888-286-8010. International callers should dial 617-801-6888. The conference passcode is 579-357-13.
Use of Non-GAAP Financial Information
GAAP results for the three month periods ended September 30, 2008 include certain non-cash debt financing expenses. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which are adjusted net income and adjusted earnings per share, excluding the impact of these items in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results appears below (Table 2). This 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.
About Gold Horse International, Inc.
Gold Horse International, Inc., through its wholly owned subsidiaries, Gold Horse International, Inc. (Nevada) and Global Rise International Ltd., controls and operates Inner Mongolia Jin Ma Construction Co., Ltd., Inner Mongolia Jin Ma Hotel Co., Ltd., and Inner Mongolia Jin Ma Real Estate Development Co., Ltd., all based in Hohhot, the regional capital of Inner Mongolia Autonomous Region in China. Jin Ma Construction has been providing construction and general contractor services in Hohhot to both private developers and to the local and regional governments since 1980. Jin Ma Hotel owns, operates and manages the Jin Ma Hotel, a full-service, two-star hotel and restaurant and banquet facility located in Hohhot. Jin Ma Real Estate develops residential and commercial properties in Hohhot.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties such as cost overruns, lack of materials, projected earnings not realized and other risks of construction that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. 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 Web site (www.sec.gov). All forward-looking statements attributable to the Company or to 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 --
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
For the Three Month Ended
September 30,
2008 2007
(Unaudited) (Unaudited)
NET REVENUES
Construction $28,378,442 $7,883,769
Hotel 829,086 856,186
Real estate 232,700 930,814
Total Revenues 29,440,228 9,670,769
COST Of REVENUES
Construction 24,383,004 6,690,373
Hotel 446,087 482,379
Real estate 143,216 564,654
Total Cost of Revenues 24,972,307 7,737,406
GROSS PROFIT 4,467,921 1,933,363
OPERATING EXPENSES:
Hotel operating expenses 15,631 35,176
Bad debt expense (recovery) (182,616) 300,894
Salaries and employee benefits 151,541 134,201
Depreciation and amortization 228,603 99,426
General and administrative 207,328 165,471
Total Operating Expenses 420,487 735,168
INCOME FROM OPERATIONS 4,047,434 1,198,195
OTHER INCOME (EXPENSES):
Other income 292 --
Interest income 945 87
Interest expense (664,391) (64,713)
Total Other Expenses (663,154) (64,626)
INCOME BEFORE PROVISION FOR INCOME TAX 3,384,280 1,133,569
PROVISION FOR INCOME TAXES 1,000,506 398,699
NET INCOME $2,383,774 $734,870
COMPREHENSIVE INCOME:
NET INCOME $2,383,774 $734,870
Unrealized foreign currency
translation gain 54,594 159,074
COMPREHENSIVE INCOME $2,438,368 $893,944
NET INCOME PER COMMON SHARE:
Basic $0.05 $0.01
Diluted $0.04 $0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 52,544,603 50,000,002
Diluted 58,890,533 50,000,002
Gold Horse International, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
For the Three Months For the Three Months
ended ended
Adjusted Net income September 30, 2008 September 30, 2007
($ in thousands except per
share data)
Net Income (Loss) Diluted
EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount 2,831 0.05 735 0.01
Adjustments
Interest expense from
amortization of
debt discount 409 0.01 -- --
Amortization of debt
Issuance costs 38 0.00 -- --
Amount per consolidated
statement of operations 2,384 0.04 735 0.01
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of As of
September 30, June 30,
2008 2008
(Unaudited)
ASSETS
Cash and cash equivalents $1,417,461 $1,637,986
Accounts receivable, net 10,468,752 7,528,608
Inventories, net 51,346 56,847
Advances to suppliers, net 96,566 95,754
Other receivable, net 181,441 35,478
Due from related parties 781,920 1,700,036
Deferred debt costs 76,740 115,110
Real estate held for sale -- 125,070
Cost and estimated earnings in
excess of billings 6,745 221,537
Construction in progress 7,752,373 4,537,240
Deposit on prepaid land use
rights 3,129,124 2,524,877
Prepaid land use rights -
current portion 3,570 3,561
Refundable performance deposit 145,877 145,522
Total Current Assets 24,111,915 18,727,626
Property and equipment, net 10,290,768 10,476,397
Deposit on prepaid land use
rights 802,322 2,182,835
Prepaid land use rights -
non-current portion 164,822 165,312
Total Assets $35,369,827 $31,552,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Convertible debt, net $1,364,375 $955,062
Loans payable, current portion 145,877 145,522
Accounts payable 2,337,336 1,278,779
Accrued expenses 526,910 468,235
Taxes payable 1,483,737 2,215,381
Advances from customers 193,404 192,356
Due to related parties 583,507 --
Billings in excess of costs and
estimated earnings 11,908 23,369
Total Current Liabilities 6,647,054 5,278,704
Loans payable, net of current
portion 4,501,174 4,490,235
Total Liabilities 11,148,228 9,768,939
Commitments -- --
Stockholders' equity:
Preferred stock ($.0001 par
value; 20,000,000 shares
authorized; none issued and
outstanding) -- --
Common stock ($.0001 par value;
300,000,000 shares authorized;
52,544,603 and 50,000,002
shares issued and outstanding
at September 30, 2008 and
June 30, 2008, respectively) 5,254 5,254
Non-controlling interest in
variable interest entities 6,095,314 6,095,314
Additional paid-in capital 4,571,178 4,571,178
Statutory reserve 1,516,444 1,216,292
Retained earnings 9,609,766 7,526,144
Other comprehensive income 2,423,643 2,369,049
Total Stockholders' Equity 24,221,599 21,783,231
Total Liabilities and
Stockholders' Equity $35,369,827 $31,552,170
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Month
Ended
September 30,
2008 2007
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,383,774 $734,870
Adjustments to reconcile net income
to net cash (used in) provided by operating
activities:
Depreciation 228,603 99,426
Rent expense associated with prepaid land
use rights 893 --
Bad debt expense (recovery) (182,616) 300,894
Interest expense from amortization
of debt discount 409,313 --
Amortization of debt issuance costs 38,370 --
Changes in assets and liabilities:
Accounts receivable (2,762,312) (2,251,612)
Inventories 5,642 (28,269)
Other receivables (123,728) (30,808)
Advance to suppliers (579) (170,828)
Costs and estimated earnings in
excess of billings 215,400 13,454
Real estate held for sale 125,415 494,377
Construction in progress (3,205,099) --
Accounts payable and accrued expenses 1,113,716 2,322,996
Income tax payable (737,276) (160,241)
Advances from customers 579 136,612
Billings in excess of costs and
estimated earnings (11,521) 47,203
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (2,501,426) 1,508,074
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of amounts due from related party 922,550 2,677
Proceeds from return of deposit on prepaid
land use rights 787,985 --
Payment of deposits for prepaid land use rights -- (66,058)
Purchase of property and equipment (17,384) (1,517,860)
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 1,693,151 (1,581,241)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances from related party 583,693 --
Proceeds from sale of common stock -- 624,459
NET CASH PROVIDED BY FINANCING ACTIVITIES 583,693 624,459
EFFECT OF EXCHANGE RATE ON CASH 4,057 3,850
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS (220,525) 555,142
CASH & CASH EQUIVALENTS - beginning of year 1,637,986 251,044
CASH & CASH EQUIVALENTS - end of the period $1,417,461 $806,186
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $921,508 $--
Income taxes $1,417,616 $534,451
For more information, please contact:
Gold Horse International, Inc.
Mr. Adam Wasserman, CFO
Phone: 800-867-0078 x702
Email: adamw@cfooncall.com
CCG Investor Relations
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
