HOHHOT, China, Feb. 18 /PRNewswire-Asia/ -- 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 and six months ended December 31, 2008.
Second Quarter Highlights
-- Net revenue increased 78.7% year-over-year to $12.9 million
-- Gross profit increased 38.8% year-over-year to $2.1 million, gross
margin was 16.0%
-- Operating income increased 56.5% year-over-year to $1.6 million
-- Net income increased 111.3% year-over-year to $1.0 million, or $0.02
per fully diluted share
-- Excluding non-cash debt financing expenses, adjusted net income rose
132.7% to $1.4 million, or $0.02 per fully diluted share
-- Successfully completed three construction projects on schedule: phases
one and two of the Tian Fu Garden residential project, phase one of the
Ai Bo Garden residential apartment project and phase two of the
Riverbank Garden Community residential project
-- Secured new construction work with aggregate estimated revenues of RMB
294.2 million ($43 million) and gross profit of $8 million: Ai Bo
Garden Phase Two residential apartment project and the Fu Xing
Committee Bath Center project
Second Quarter Results
For the second quarter of fiscal year 2009, net revenue was $12.9 million, up 78.7% from $7.2 million in the same quarter of 2007. Construction revenue was $11.9 million, or 92.2% of net revenue, up from $6.2 million, or 85.6% of net revenue, for the three months ended December 31, 2007. The significant increase was mainly due to several major construction projects: River Bank Garden (buildings 5 to 8 and phase two), Tian Fu residential project (phases one and two), the Ai Bo Garden residential apartment project (phase one and two), the Lanyu Garden Number 3 Residential Project and the Fu Xing Committee Bath Center project. Revenue from the hotel segment was $0.9 million, up 19.6% from $0.7 million in the same quarter prior year and revenue from the real estate segment was $0.1 million, down 54.0% from $0.3 million a year ago due to the Company's sale of its remaining real estate inventory and refocused business strategy to concentrate on its construction segment.
"Our strong second-quarter results reflect the continued success of our experienced management team in executing a business strategy that capitalizes on our excellent government relationships and core competencies in construction and project management," said Mr. Liankuan Yang, chairman and CEO of Gold Horse International, Inc. "Given our established presence in an expanding region and the Chinese government's stimulus plan to foster real estate and infrastructure construction, we are confident that we will secure additional profitable projects to meet our guidance for 2009."
Gross profit for the quarter was $2.1 million, up 38.8% from $1.5 million for the same quarter last year. Gross margin was 16.0%, down from 20.6% compared to the same period prior year. The decrease in gross margin was primarily due to increases in costs for building supplies and labor costs incurred on projects.
Operating expenses for the quarter were $0.5 million, or 3.5% of net revenue, down slightly for the three months ended December 31, 2007, or 6.3% of net revenue. While the Company incurred higher depreciation and amortization expenses, operating expenses decreased slightly due to decreases in salaries and employee benefits and general and administrative expenses.
Operating income for the quarter was $1.6 million, up 56.5% from $1.0 million for the same period prior year. Operating margin was 12.5% for the quarter, compared to 14.2% for the same period in 2007.
Net income for the quarter was $1.0 million, or $0.02 per fully diluted share, compared to net income of $0.5 million, or $0.01 per fully diluted share, for the same period prior year. Excluding non-cash debt financing expenses, adjusted net income was $1.4 million, or $0.02 per fully diluted share compared with adjusted net income of $0.6 million, or $0.01 per fully diluted share, a year ago.
Six Months Results
Net revenue for the six months ended December 31, 2008 was $42.3 million, up 150.7% from $16.9 million in the same period prior year. Construction revenue was $40.3 million, or 95.1% of net revenue, up 186.4% from $14.1 million, or 83.3% of net revenue, in the same period of 2007. Revenue from the hotel segment was $1.7 million, or 4.0% of net revenue, up 7.2% from $1.6 million, or 9.3% of net revenue, in the same period prior year. Revenue from the real estate segment was $0.4 million, or 0.9% of net revenue, down 69.6% from $1.3 million, or 7.4% of net revenue, in the same period prior year. Gross profit was $6.5 million, or 15.4% of net revenue, up 91.0% from $3.4 million, or 20.2% of net revenue for the same period of last year. Operating income was $5.7 million, or 13.4% of net revenue, up 154.1% from $2.2 million, or 13.2% of net revenue, in the same period of 2007. Net income was $3.4 million, or $0.06 per fully diluted share, up 180.3% from $1.2 million, or $0.02 per fully diluted share in the same period of 2007. Excluding non-cash debt financing expenses, adjusted net income was $4.3 million, or $0.07 per fully diluted share for the six months ended December 31, 2008, compared with adjusted net income of $1.4 million, or $0.02 per fully diluted share, in the same period last year.
Financial Condition
As of December 31, 2008, Gold Horse had $0.2 million in cash and cash equivalents, $10.0 million in working capital and a current ratio of 2.1 to 1. At quarter end the Company had short-term debt, including the unamortized discount on the Company's convertible debt, of $2.3 million and long-term debt of $4.4 million. Shareholders' equity stood at $25.3 million, up from $21.8 million as of June 30, 2008. Cash used in operating activities during the first half of fiscal 2009 was $5.2 million, and was used to fund construction in progress and accounts receivable. The Company is currently in negotiations with several banks and expects to secure short-term bank loans by the end of the third quarter of fiscal 2009. In addition, the Company has established a special committee to accelerate collections of accounts receivable in order to improve cash flow.
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 construction division is expected to generate the majority of revenue in fiscal 2009 due to the number of construction projects in progress and management's strategy to selectively bid on profitable projects. The hotel management segment is expected to remain consistent with fiscal 2008. For the real estate segment, continued interest rate cuts and the Chinese central government's commitment to offer more affordable property in its effort to weather the current global financial crisis should stimulate the real estate sector over time. Currently the Company expects to receive annual payments from projects built by Gold Horse and sold to educational institutions.
"We see many potential business opportunities for our construction business, especially given the Chinese government's recent allocation of RMB 4 trillion to encourage affordable housing, rural development and infrastructure projects in response to the current global financial crisis. In addition, the Chinese government continues to foster the real estate market by lowering interest rates," commented Mr. Yang. "While the near term impact of these measures is not clear, we believe they provide favorable long term benefits for our construction and real estate development businesses," added Mr. Yang.
Conference Call
The Company will host a conference call at 9:00 AM Eastern Standard Time on Wednesday, February 18, 2009 to discuss results for the quarter ended December 31, 2008. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-339-2688. International callers should dial 617-847-3007. The passcode for the call is 722-936-38. If you are unable to participate in the call at this time, a replay will be available for 14 days starting from Wednesday, February 18 at 11: 00 AM Eastern Standard Time. To access the replay, dial 893-541-79. International callers should dial 617-801-6888. The conference passcode is 893-541-79.
Use of Non-GAAP Financial Information
GAAP results for the three month and six month periods ended December 31, 2008 and for the three and six months ended December 31, 2007 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 fully diluted 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 the ability of the Company to secure short term bank loans and accelerate collection of receivables, 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 -
Table 1
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three For the Six
Months Ended Months Ended
December 31, December 31,
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET REVENUES
Construction $11,894,829 $6,177,624 $40,273,271 $14,061,393
Hotel 858,378 717,526 1,687,464 1,573,712
Real estate 149,490 324,714 382,190 1,255,528
Total Revenues 12,902,697 7,219,864 42,342,925 16,890,633
COST OF REVENUES
Construction 10,207,643 5,177,403 34,590,647 11,867,776
Hotel 475,448 379,225 921,535 861,604
Real estate 157,087 177,375 300,303 742,029
Total Cost of
Revenues 10,840,178 5,734,003 35,812,485 13,471,409
GROSS PROFIT 2,062,519 1,485,861 6,530,440 3,419,224
OPERATING EXPENSES:
Hotel operating
expenses 16,659 21,138 32,290 56,314
Bad debt expense
(recovery) (11,285) 6,797 (193,901) 307,691
Salaries and
employee benefits 150,307 184,297 301,848 318,498
Depreciation and
amortization 209,654 126,690 438,257 226,116
General and
administrative 87,151 118,256 294,479 283,727
Total Operating
Expenses 452,486 457,178 872,973 1,192,346
INCOME FROM OPERATIONS 1,610,033 1,028,683 5,657,467 2,226,878
OTHER INCOME (EXPENSES):
Other income (expense) 2,086 (1,672) 2,378 (1,672)
Interest income 551,373 2,027 552,318 2,114
Interest expense (671,835) (227,692) (1,336,226) (292,405)
Total Other Expenses (118,376) (227,337) (781,530) (291,963)
INCOME BEFORE PROVISION
FOR INCOME TAX 1,491,657 801,346 4,875,937 1,934,915
PROVISION FOR INCOME
TAXES 500,236 332,158 1,500,742 730,857
NET INCOME $991,421 $469,188 $3,375,195 $1,204,058
COMPREHENSIVE INCOME:
NET INCOME $991,421 $469,188 $3,375,195 $1,204,058
Unrealized foreign
currency
translation gain 9,130 398,951 63,724 558,025
COMPREHENSIVE INCOME $1,000,551 $868,139 $3,438,919 $1,762,083
NET INCOME PER COMMON
SHARE:
Basic $0.02 $0.01 $0.06 $0.02
Diluted $0.02 $0.01 $0.06 $0.02
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 52,625,473 51,161,837 52,585,038 50,580,920
Diluted 58,971,403 59,434,147 58,930,968 55,902,121
Table 2
Gold Horse International, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
For the three For the three
Months ended Months ended
Adjusted Net income December 31, 2008 December 31, 2007
($ in thousands except per
share data)
Net Income (Loss) Net Diluted Net Diluted
Diluted EPS Income EPS Income EPS
Adjusted Amount 1,439 0.02 618 0.01
Adjustments
Interest expense from
amortization of
debt discount 409 -- 136 --
Amortization of debt
issuance costs 38 -- 13 --
Amount per consolidated
statement of operations 991 0.02 469 0.01
For the Six For the Six
Months ended Months ended
Adjusted Net income December 31, 2008 December 31, 2007
($ in thousands except per
share data)
Net Income (Loss) Net Diluted Net Diluted
Diluted EPS Income EPS Income EPS
Adjusted Amount 4,271 0.07 1,353 0.02
Adjustments
Interest expense from
amortization of
debt discount 819 0.01 136 --
Amortization of debt
issuance costs 77 -- 13 --
Amount per consolidated
statement of operations 3,375 0.06 1,204 0.02
Table 3
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of As of
December 31, June 30,
2008 2008
(Unaudited)
ASSETS
Cash and cash equivalents $243,983 $1,637,986
Accounts receivable, net 11,554,905 7,528,608
Note receivable, net
- current portion 158,618 --
Inventories, net 41,579 56,847
Advances to suppliers, net 98,038 95,754
Other receivable, net 28,761 35,478
Due from related parties 43,074 1,700,036
Deferred debt costs 38,370 115,110
Real estate held for sale -- 125,070
Cost and estimated earnings in
excess of billings 5,103 221,537
Construction in progress 5,084,686 4,537,240
Deposit on prepaid land use rights 1,889,419 2,524,877
Prepaid land use rights
- current portion 3,570 3,561
Refundable performance deposit -- 145,522
Total Current Assets 19,190,106 18,727,626
Property and equipment, net 10,082,495 10,476,397
Note receivable - non-current
portion, net 8,641,523 --
Deposit on prepaid land use rights 802,428 2,182,835
Prepaid land use rights
- non-current portion 163,951 165,312
Total Assets $38,880,503 $31,552,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Convertible debt, net $1,773,687 $955,062
Loans payable, current portion 259,695 145,522
Accounts payable 5,436,970 1,278,779
Accrued expenses 596,891 468,235
Taxes payable 839,027 2,215,381
Advances from customers 194,888 192,356
Billings in excess of costs and
estimated earnings 51,228 23,369
Total Current Liabilities 9,152,386 5,278,704
Loans payable, net of current portion 4,387,967 4,490,235
Total Liabilities 13,540,353 9,768,939
Commitments (Note 16) -- --
Stockholders' equity:
Preferred stock ($.0001 par value;
20,000,000 shares authorized; none
issued and outstanding) -- --
Common stock ($.0001 par value;
300,000,000 shares authorized;
52,668,603 and 52,544,603 shares
issued and outstanding at
December 31, 2008 and June 30, 2008) 5,266 5,254
Non-controlling interest in variable
interest entities 6,095,314 6,095,314
Additional paid-in capital 4,689,166 4,571,178
Statutory reserve 1,665,779 1,216,292
Retained earnings 10,451,852 7,526,144
Other comprehensive income 2,432,773 2,369,049
Total Stockholders' Equity 25,340,150 21,783,231
Total Liabilities and
Stockholders' Equity $38,880,503 $31,552,170
Table 4
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Month Ended
December 31,
2008 2007
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,375,195 $1,204,058
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation 438,257 226,116
Rent expense associated with
prepaid land use rights 1,786 --
Bad debt expense (recovery) (193,901) 307,691
Interest expense from amortization
of debt discount 818,625 136,437
Amortization of debt issuance costs 76,740 12,790
Recognition of unearned gain (51,735) --
Changes in assets and liabilities:
Accounts receivable (3,847,036) 754,410
Note receivable 200,378 --
Inventories 15,417 (30,785)
Other receivables 40,119 154,832
Advance to suppliers (2,038) (86,010)
Costs and estimated earnings in
excess of billings 217,038 14,289
Real estate held for sale 125,412 647,237
Construction in progress (9,486,120) (978,031)
Refundable performance deposit 145,920 --
Accounts payable and accrued expenses 4,283,475 (642,811)
Taxes payable (1,382,271) (280,423)
Advances from customers 2,038 (459,089)
Billings in excess of costs and
estimated earnings 27,804 (124,843)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (5,194,897) 855,868
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of amounts due from
related party 1,661,601 36,128
Proceeds from sale of property and
equipment -- 1,451
Proceeds from return of deposit on
prepaid land use rights 2,028,288 --
Payment of deposits for prepaid
land use rights -- (732,722)
Purchase of property and equipment (17,384) (1,854,866)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 3,672,505 (2,550,009)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt -- 2,183,000
Payment of placement fees -- (204,640)
Repayment of loans payable -- (133,222)
Proceeds from sale of common stock 118,000 2,219,252
NET CASH PROVIDED BY FINANCING
ACTIVITIES 118,000 4,064,390
EFFECT OF EXCHANGE RATE ON CASH 10,389 68,065
NET (DECREASE) INCREASE IN CASH & CASH
EQUIVALENTS (1,394,003) 2,438,314
CASH & CASH EQUIVALENTS
- beginning of period 1,637,986 251,044
CASH & CASH EQUIVALENTS
- end of the period $243,983 $2,689,358
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $193,043 $801,336
Income taxes $2,308,429 $946,591
For more information, please contact:
Gold Horse International, Inc.
Mr. Adam Wasserman, CFO
Tel: +1-800-867-0078 x702
Email: adamw@cfooncall.com
CCG Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
