NEW YORK, Aug., 23, 2011 /PRNewswire via COMTEX/ -- Gushan Environmental Energy Limited ("Gushan" or the "Company"; NYSE: GU), a leading producer of biodiesel in China, today announced its unaudited consolidated financial results for the second quarter of 2011.
As of November 12, 2010, the ratio for Gushan's ADSs representing ordinary shares has changed from one (1) ADS representing two (2) ordinary shares to one (1) ADS representing ten (10) ordinary shares. Gushan presents all per ADS data and number of ADSs in this announcement as if the ratio change was effective as of the beginning of the earliest period presented.
Highlights for the Second Quarter of 2011 (Note 1)
Total revenues increased by 443.0% year-to-year and by 32.0% quarter-on-quarter to RMB327.1 million (US$50.6 million).
Gross profit amounted to RMB5.8 million (US$0.9 million), compared to a gross loss of RMB33.6 million for the second quarter of 2010 and a gross profit of RMB4.4 million for the first quarter of 2011.
Loss from operations amounted to RMB23.2 million (US$3.6 million), compared to a loss from operations of RMB112.7 million for the second quarter of 2010 and a loss from operations of RMB14.5 million for the first quarter of 2011.
Net loss attributable to the Company amounted to RMB26.4 million (US$4.1 million), compared to a net loss of RMB108.5 million for the second quarter of 2010 and a net loss of RMB17.5 million for the first quarter of 2011.
Non-GAAP net loss attributable to the Company amounted to RMB21.9 million (US$3.4 million), compared to a non-GAAP net loss attributable to the Company of RMB57.8 million for the second quarter of 2010 and a non-GAAP net loss attributable to the Company of RMB20.9 million for the first quarter of 2011. (Note 2)
Sales volume of biodiesel decreased by 73.8% year-to-year and by 25.8% quarter-on-quarter to 3,361 tons. (Note 3)
Average selling price of biodiesel increased by 38.7% year-to-year and by 14.6% quarter-on-quarter to RMB6,156 (US$952.4) per ton. (Note 3)
Sales volume of recycled copper products increased by 33.9% quarter-on-quarter to 4,958 tons.
Average selling price of recycled copper products increased by 1.8% quarter-on-quarter to RMB60,638 (US$9,381.6) per ton.
Cash balance amounted to RMB115.7 million (US$17.9 million) as of June 30, 2011.
Note 1: Translation from RMB into US$ at RMB6.4635 to US$1.00, see "Currency Convenience Translation" below.
Note 2: GAAP represents Generally Accepted Accounting Principles in the United States of America ("U.S. GAAP" or "GAAP") in this press release. All non-GAAP measures exclude share-based compensation expenses, impairment loss of and loss on disposal of property, plant and equipment, change in fair value of contingent consideration liability, provision for consumption tax and income tax effect thereof. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of management's use of non-GAAP information set forth elsewhere in this announcement.
Note 3: Sales volume of biodiesel includes biodiesel sold as a refined oil product to the fuel market and biodiesel sold as fatty acid methyl ester, an intermediate product to the chemical industry. Average selling price of biodiesel represents total average selling price of biodiesel sold as a refined oil product to the fuel market and biodiesel sold as an intermediate product to the chemical industry.
"Strong revenue growth in the second quarter of 2011 was driven by Gushan's diversification into the recycled copper products business with the acquisition of Mianyang Jin Xin Copper Company Limited in late 2010," said Jianqiu Yu, Chairman and Principal Executive Officer of Gushan, " We are continuing to grow our recycled copper products business, most recently through the acquisition of a controlling interest in recycled copper producer Hunan Yin Lian Xiangbei Copper Company Limited in August 2011. In relation to our biodiesel business, inflation in raw material costs remains a significant challenge and we are continuing to seek ways to control raw material costs and to restore our biodiesel business to profitability."
Financial Results for the Second Quarter of 2011
Revenues
The Company's revenues amounted to RMB327.1 million (US$50.6 million) for the second quarter of 2011, representing an increase of 443.0% from RMB60.2 million for the second quarter of 2010 and an increase of 32.0% from RMB247.8 million for the first quarter of 2011.
The increase in revenues on a year-to-year basis was mainly due to revenue contribution from the recycled copper products business of Mianyang Jin Xin Copper Company Limited ("Jin Xin") of RMB304.8 million (US$47.2 million). As a result of the Company's initial acquisition of a 67% beneficial ownership interest in Jin Xin, from November 2010, the Company began consolidating Jin Xin's operating results into its operating results. In January 2011, the Company acquired an additional 8% beneficial ownership interest in Jin Xin, increasing its ownership in Jin Xin to 75%. The increase in revenues on a sequential quarterly basis was mainly due to the increase in revenues from the recycled copper products business.
The Company's revenue from its biodiesel business totaled RMB22.3 million (US$3.4 million) for the second quarter of 2011, representing a decrease of 63.0% from RMB60.2 million for the second quarter of 2010 and a decrease of 12.9% from RMB25.6 million for the first quarter of 2011. The decrease in revenue from the biodiesel business on both a year-to-year and sequential quarterly basis was mainly due to a decrease in the sales volume of both biodiesel and biodiesel by-products.
The sales volume of biodiesel amounted to 3,361 tons for the second quarter of 2011, representing a decrease of 73.8% from 12,833 tons for the second quarter of 2010 and a decrease of 25.8% from 4,532 tons for the first quarter of 2011. The average selling price of biodiesel was RMB6,156 (US$952.4) per ton for the second quarter of 2011, representing an increase of 38.7% from RMB4,439 per ton for the second quarter of 2010 and an increase of 14.6% from RMB5,371 per ton for the first quarter of 2011.
The sales volume of biodiesel by-products amounted to 580 tons for the second quarter of 2011, representing a decrease of 65.5% from 1,682 tons for the second quarter of 2010, and an increase of 5.6% from 549 tons for the first quarter of 2011. The average selling price of biodiesel by-products was RMB2,700 (US$417.7) per ton for the second quarter of 2011, representing an increase of 39.3% from RMB1,938 per ton for the second quarter of 2010 and an increase of 21.6% from RMB2,221 per ton for the first quarter of 2011.
The year-to-year decrease in the sales volume of biodiesel was mainly due to the suspension of operations at the Company's Sichuan plant since August 2010. The Company suspended production at its old plant in San Tai County in Sichuan in August 2010 in preparation for the relocation of the production lines to its new plant in Qin Dong Bei Industrial Park. The relocation of the Sichuan plant, together with the new plant, resulted in a combined annual biodiesel production capacity of 100,000 tons for Sichuan Gushan. The new plant has been conducting a trial run since early June 2011. The decrease in sales volume of biodiesel on a quarterly sequential basis was due to a decrease in production and sales volume at Beijing Gushan and Hebei Gushan as a result of the Company's strategy to avoid negative operating cash flows caused by the increasingly high raw material input costs.
The year-to-year and sequential quarterly increase in the average selling price of biodiesel was mainly attributable to improved conditions in the refined oil market in China following the decline in the market price of diesel in China, which began in the fourth quarter of 2008 and continued throughout the third quarter of 2009, resulting from a decrease in global oil prices and weaker industrial production in China amid the global financial crisis. The average selling price of biodiesel began to increase gradually from the fourth quarter of 2009 to 2011.
The Company's revenue from its recycled copper business totaled RMB304.8 million (US$47.2 million) for the second quarter of 2011, representing an increase of 37.2% from RMB222.2 million for the first quarter of 2011. The increase in revenue on a sequential quarterly basis was mainly due to an increase in sales volume of recycled copper products by 34.0% from 3,701 tons for the first quarter of 2011 to 4,958 tons for the second quarter of 2011. The increase was mainly due to the fact that in the first quarter of 2011, sales volume of recycled copper products was lower during the Chinese New Year holiday in February, and because the Company's business operations experienced a temporary contraction during the period of significant market volatility immediately following the earthquake in Japan in March 2011. The average selling price of recycled copper products increased by 1.8% from RMB59,558 per ton for the first quarter of 2011 to RMB60,638 (US$9,381.6) per ton for the second quarter of 2011.
Cost of Revenues
Cost of revenues for the second quarter of 2011 totaled RMB321.3 million (US$49.7 million), representing an increase of 242.5% from RMB93.8 million for the second quarter of 2010 and an increase of 32.0% from RMB243.4 million for the first quarter of 2011. The increase on a year-to-year basis was mainly due to cost of revenues of RMB294.9 million (US$45.6 million) from Jin Xin. The increase on a sequential quarterly basis was mainly due to the increase in sales volume of recycled copper products.
The cost of revenues of the Company's biodiesel business totaled RMB26.4 million (US$4.1 million) for the second quarter of 2011, representing a decrease of 71.9% from RMB93.8 million for the second quarter of 2010 and a decrease of 16.5% from RMB31.6 million for the first quarter of 2011. Excluding the provision for consumption tax, cost of revenues of the Company's biodiesel business for the second quarter of 2011 decreased by 70.7% from the second quarter of 2010.
Cost of revenues of the Company's biodiesel business included a provision for consumption tax of RMB3.8 million for the second quarter of 2010. The provision was subsequently reversed in the fourth quarter of 2010. The reversal of the provision for consumption tax was made as a result of the issuance of Caishui [2010] No. 118, Notice Regarding the Exemption from Consumption Tax on Pure Biodiesel Made from Waste Animal Fats or Vegetable Oils ("Caishui 118") by the Ministry of Finance and the State Administration of Taxation of the PRC ("SAT") which clarified that, subject to fulfillment of certain conditions, pure biodiesel made from waste animal fat or vegetable oil is exempt from consumption tax in China.
The decrease in cost of revenues of the Company's biodiesel products on both a year-to-year and sequential quarterly basis was primarily attributable to a decrease in the Company's sales volume of both biodiesel and biodiesel by-products. This was partially offset by an increase in the overall average unit cost of used cooking oil, which increased by 32.5% from RMB3,600 per ton for the second quarter of 2010 and by 16.3% from RMB4,100 per ton for the first quarter of 2011 to RMB4,770 (US$738.0) per ton in the second quarter of 2011. The increases in the cost of used cooking oil were caused by an increase in the Company's suppliers' costs, which are primarily affected by general cost inflation, particularly in labor and transportation in China, as well as a general increase in prices charged by the their upstream suppliers.
The cost of revenues of the Company's recycled copper business totaled RMB294.9 million (US$45.6 million) for the second quarter of 2011, representing an increase of 39.2% from RMB211.8 million for the first quarter of 2011. The increase was mainly due to an increase in the unit cost of raw materials by 4.4% from RMB56,173 per ton for the first quarter of 2011 to RMB58,657 (US$9,075.1) per ton for the second quarter of 2011 and an increase in sales volume by 34.0% from 3,701 tons for the first quarter of 2011 to 4,958 tons for the second quarter of 2011.
Gross profit (loss)
The Company's gross profit for the second quarter of 2011 totaled RMB5.8 million (US$0.9 million), compared to a gross loss of RMB33.6 million for the second quarter of 2010 and a gross profit of RMB4.4 million for the first quarter of 2011. The Company's gross profit for the second quarter of 2011 was composed of a gross loss of RMB4.1 million (US$0.6 million) from its biodiesel business, representing a gross loss margin of 18.6%, and a gross profit of RMB9.9 million (US$1.5 million) from its recycled copper products business, representing a gross profit margin of 3.3%.
The Company's gross loss for the second quarter of 2010 was derived from its biodiesel business, with a gross loss margin of 55.8%. Excluding the provision for the consumption tax, the gross loss margin of the Company's biodiesel business would have been 49.4% for the second quarter of 2010. The Company's gross profit for the first quarter of 2011 was composed of a gross loss of RMB6.0 million from its biodiesel business, representing a gross loss margin of 23.7%, and a gross profit of RMB10.4 million from its recycled copper products business, representing a gross profit margin of 4.7%.
The improvement in the gross margin of the Company's biodiesel business on a year-to-year basis was mainly due to a decrease in depreciation expenses as a result of a lower cost base for certain of the Company's property, plant and equipment after these assets were impaired in 2010. The improvement in the gross margin of the Company's biodiesel business on a sequential quarterly basis was mainly due to a change in the product mix where the Company sold a higher proportion of crude glycerine, which yields a higher margin.
The decrease in gross profit margin of the Company's recycled copper business on a sequential quarterly basis was mainly caused by a narrowing spread between the average selling price of recycled copper products and the average unit cost of raw materials. The average unit costs of raw materials increased by 4.4%, while the average selling price of its recycled copper products increased by 1.8%.
Research and Development Expenses
Research and development expenses totaled RMB0.1 million (less than US$0.1 million) in the second quarter of 2011, as compared to RMB1.0 million for the second quarter of 2010 and RMB0.2 million for the first quarter of 2011. The decrease on a year-to-year basis was mainly due to a decrease in depreciation expenses as a result of a lower cost base for certain of the Company's property, plant and equipment after these assets were impaired in 2010.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the second quarter of 2011 totaled RMB17.7 million (US$2.7 million), representing an increase from RMB17.2 million for the second quarter of 2010 and from RMB16.4 million for the first quarter of 2011.
The increase on a year-to-year basis was mainly due to miscellaneous selling, general and administrative expenses incurred by Jin Xin, a subsidiary acquired in November 2010 and an increase in professional fees in relation to the acquisition of Hunan Yin Lian Xiangbei Copper Company Limited ("Xiangbei"), a PRC-based company that is engaged in the recycled copper products business. The increase was offset by a decrease in share-based compensation as a result of the cancellation of certain share options in the fourth quarter of 2010 and a decrease in miscellaneous selling, general and administrative expenses incurred by our biodiesel business.
The increase on a sequential quarterly basis was mainly due to an increase in professional fees in relation to the acquisition of Xiangbei. The increase was partly offset by a decrease in share-based compensation, the amounts of which recognized are declining as the options become vested.
Other Operating Expenses
Other operating expenses for the second quarter of 2011 amounted to RMB8.9 million (US$1.4 million), compared to RMB19.2 million for the second quarter of 2010 and RMB8.9 million for the first quarter of 2011. The expenses mainly consisted of depreciation of buildings and machinery and other amortization and salary paid to factory workers during the periods in which certain plants suspended production.
The decrease on a year-to-year basis was mainly due to a decrease in depreciation expenses as a result of a lower cost base for certain of the Company's property, plant and equipment after these assets were impaired in 2010.
As previously announced in 2009 and 2010, the Company suspended or deferred biodiesel production in certain plants due to the consumption tax issue, traffic controls pursuant to government directives and a relocation of production facility in 2009 and 2010. The Company suspended production in Fujian Gushan beginning April 2009 due to road maintenance which restricted access to the plant by the Company's suppliers and customers and had not resumed production due to the consumption tax issue. The Company suspended production in Shanghai Gushan since April 2010 due to heightened enforcement of control measures relating to poisonous, hazardous and flammable chemicals adopted by the Shanghai municipal government during the hosting of the Expo 2010 and has not resumed production as a result of an ongoing lawsuit brought against it by a construction contractor of Shanghai Gushan's plant. Although construction of the production facilities for Chongqing Gushan and Hunan Gushan was completed in 2009, the Company deferred the commencement of production at these plants due to the consumption tax issue. The Company suspended production at its old plant in San Tai County in Sichuan in August 2010 in preparation for the relocation of the production lines to its new plant in Qin Dong Bei Industrial Park. The new plant in Sichuan has been conducting a trial run since early June 2011. If these suspensions and deferrals had not occurred, the depreciation of the buildings and machinery and other amortization and salary paid to factory workers of these plants would have been classified as cost of revenues.
Although the consumption tax issue has been resolved with the issuance of Caishui 118, as a result of increasingly high raw material input costs in 2011, the Company is currently evaluating the profitability of each of its biodiesel plant. The Company will evaluate the appropriateness of continuing, commencing or resuming production of biodiesel at each of its biodiesel plants and will continue, commence or resume production only if the biodiesel plant is able to operate on a positive cash flow basis in order to minimize the financial burden on the Company as a whole.
Impairment loss on property, plant and equipment
As previously announced, the impairment loss on property, plant and equipment incurred in the second quarter of 2010 was due to the relocation of Sichuan Gushan's production lines from San Tai County to its new plant in Qin Dong Bei Industrial Park.
Change in Fair Value of Contingent Consideration Liability
In November 2010, the Company acquired a 67% beneficial ownership interest in Jin Xin through a series of transactions in exchange for up to 24 million of its newly issued ordinary shares ("Contingent Consideration Shares"). The Contingent Consideration Shares are subject to an earn-out arrangement whereby 6 million ordinary shares were delivered to the selling shareholder at the closing of the transactions, while the remaining 18 million ordinary shares were placed into escrow ("Additional Contingent Consideration Shares") to be released in stages upon the determination of Jin Xin's net income under U.S. GAAP for the year ended December 31, 2010 and the three years ending December 31, 2012.
Under U.S. GAAP, the Additional Contingent Consideration Shares should be classified as a liability and stated at their fair value at the acquisition date and each reporting date. The subsequent change in the fair value of the Additional Contingent Consideration Shares at each reporting date would be recognized in the statement of operations. The Company recognized a decrease in fair value of RMB6.6 million for the first quarter of 2011 and an increase in fair value of RMB2.4 million (US$0.4 million) for the second quarter of 2011. The decrease in the fair value of the outstanding Additional Contingent Consideration Shares in the first quarter of 2011 was mainly due to a decrease in the market price of the Company's ADSs and a decrease in the estimated probability-weighted number of ordinary shares to be further issued. The increase in the fair value of the outstanding Additional Contingent Consideration Shares in the second quarter of 2011 was mainly due to the release of 6 million ordinary shares from escrow to the selling shareholder of Jin Xin, but the increase was partly offset by a decrease caused by a further decrease in the market price of the Company's ADSs and a further decrease in the estimated probability-weighted number of ordinary shares to be further issued.
Other Income (Expense)
Other income (expense) primarily consists of interest income, interest expenses, foreign currency exchange losses and other income (expenses), net. Interest income for the second quarter of 2011 amounted to RMB0.2 million (less than US$0.1 million). Interest expenses for the second quarter of 2011 amounted to RMB1.4 million (US$0.2 million) mainly incurred by Jin Xin in respect of short term loans. Foreign currency exchange loss for the second quarter of 2011 amounted to RMB0.3 million (less than US$0.1 million). Other income (expenses), net for the second quarter of 2011 included, among others, income from the Company's depositary bank, a provision for business tax on intercompany advances among companies in China, VAT refunds, government subsidy income and a loss which resulted from copper futures contracts. Starting from the first quarter of 2011, Jin Xin sought to diversify risks associated with the market prices for copper by using standard futures contracts of copper traded on the Shanghai Futures Exchange. From investing in such copper futures contracts, Jin Xin incurred a loss of RMB0.4 million (less than US$0.1 million) in the second quarter of 2011 and a profit of RMB35,000 in the first quarter of 2011.
Income Tax Benefit (Expense)
Income tax benefit (expense) primarily consisted of corporate income tax ("CIT"), a provision for dividend withholding tax and other overseas withholding tax.
CIT for the second quarter of 2011 amounted to RMB1.8 million (US$0.3 million), as compared to nil for the second quarter of 2010 and RMB0.5 million for the first quarter of 2011.
According to the CIT law, which came into effect from January 1, 2008, and relevant regulations promulgated thereunder, PRC-resident enterprises are levied withholding tax at a rate of 10% on dividends to their non-PRC-resident corporate investors for earnings accumulated beginning on January 1, 2008. Undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Under the Arrangement between the Mainland of China and Hong Kong Special Administration Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "Mainland China/HKSAR DTA") and Guoshuihan [2009] No. 601 on "How to understand and recognize the "Beneficial Owner" in Double Taxation Agreements" ("Circular 601"), a qualified Hong Kong tax resident which is the "beneficial owner" and holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. Pursuant to Circular 601, a beneficial owner under a tax treaty is not purely determined by its place of legal registration but also by other factors which depend on specific facts and circumstances, and significant judgment may be involved.
Although the Company intends to apply for the reduced withholding tax rate of 5% in the future when dividends for earnings accumulated from January 1, 2008 by its PRC operating subsidiaries are wired out of China, the Company made a 10% provision on such undistributed earnings for such withholding tax. If the local SATs approve a reduced withholding tax rate of 5% when such dividends are actually wired out of China, any excess provision will be reversed in subsequent financial statements.
In respect of its biodiesel business, the Company reduced the provision for withholding tax by RMB0.3 million (less than US$0.1 million) for the second quarter of 2011, RMB4.7 million for the second quarter of 2010 and RMB0.6 million for the first quarter of 2011. The decrease was due to the losses incurred in the biodiesel business. In respect of its recycled copper products business, the Company made a provision for withholding tax of RMB0.5 million (US$0.1 million) and RMB0.6 million for the second quarter and the first quarter of 2011, respectively. Other overseas withholding tax amounted to RMB0.3 million (less than US$0.1 million), RMB0.3 million and RMB0.3 million for the second quarter of 2011, the second quarter of 2010 and the first quarter of 2011, respectively.
Net Loss Attributable to the Company
Net loss attributable to the Company amounted to RMB26.4 million (US$4.1 million) for the second quarter of 2011, compared to RMB108.5 million for the second quarter of 2010 and RMB17.5 million for the first quarter of 2011.
Non-GAAP net loss attributable to the Company amounted to RMB21.9 million (US$3.4 million) for the second quarter of 2011, compared to RMB57.8 million for the second quarter of 2010 and RMB20.9 million for the first quarter of 2011.
Financial Condition
As of June 30, 2011, the Company had working capital of RMB154.0 million (US$23.8 million), reflecting total current assets of RMB416.8 million (US$64.5 million) and total current liabilities of RMB262.8 million (US$40.7 million). Of the total current assets, the Company had RMB115.7 million (US$17.9 million) in cash, represented by RMB18.9 million, HK$22.7 million and US$4,000 deposited in licensed commercial banks in China and HK$0.7 million and US$11.9 million deposited in licensed commercial banks in Hong Kong.
Recent Events
Acquisition of Xiangbei
As of the date of this press release, the Company had consummated its acquisition of a controlling interest in Xiangbei, a PRC-based company that is engaged in recycled copper products business in Hunan province.
Xiangbei is engaged in the manufacturing of copper rods, copper bars and copper plates from recycled copper and electrolytic copper in Boluo, Hunan. Xiangbei mainly sells its products to producers of power wires and cables in various provinces in China. As of the date of this press release, Xiangbei has a daily production capacity of approximately 50 tons of recycled copper products.
Business Outlook for Fiscal Year 2011
During the second quarter of 2011, the Company's average biodiesel selling prices continued to improve over the previous quarter as demand for diesel in China continued its recovery in conjunction with the economic recovery in China and globally. Going forward, the Company expects this trend to continue so long as the global economy and China's economy continue to improve. However, inflationary pressures in China continue to be high, which continues to adversely affect the Company's raw material input costs, which are increasing at a rate higher than the rate of increase in the Company's average biodiesel selling prices. As a result, the production and sale of biodiesel in the current business environment is not profitable for the Company. In order to minimize the financial burden on the Company as a whole, the Company will evaluate the appropriateness of continuing, commencing or resuming production of biodiesel at each of its biodiesel plants and will continue, commence or resume production only if the biodiesel plant is able to operate on a positive cash flow basis. The Company does not expect each of its biodiesel plants to be able to operate, achieve and maintain positive cash flows given the current trend of raw material input costs increasing at a higher rate than average biodiesel selling prices. While the Company continues with its efforts to control its raw material input costs, it is expected that the production and sales volume of biodiesel will continue to be low in the near term until positive results are achieved from the Company's efforts in controlling raw material input costs. Meanwhile, the Company's recycled copper products business continued to contribute positively to the Company's overall financial performance and this trend is expected to continue. The Company believes that the recently completed acquisition of Xiangbei will also provide additional positive contribution. The Company continues to explore the possibility of acquiring more businesses in the recycled copper products industry that will complement its existing businesses and strengthen its overall recycled copper products business portfolio.
Unaudited Financial Statements
The unaudited condensed consolidated statements of operations, balance sheets and cash flow statements accompanying this announcement have been prepared by management using U.S. GAAP. These unaudited financial statements are not intended to fully comply with U.S. GAAP because they do not present all of the disclosures required by U.S. GAAP. The December 31, 2010 balance sheet was derived from audited consolidated financial statements of the Company.
Currency Convenience Translation
The conversion of Renminbi into U.S. dollars in this earnings release, made solely for the reader's convenience, is based on the H.10 statistical release of the Federal Reserve Board as of June 30, 2011, which was RMB6.4635 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at such rate, or at any other rate. The percentages stated in this earnings release are calculated based on Renminbi.