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China Gerui Adv Mtals Grp Ltd : China Gerui Advanced Materials Group Limited Announces Reclassification of Certain Items in Third Quarter 2011 Press Release

03/12/2012 | 06:05am US/Eastern

ZHENGZHOU, China, March 12, 2012 /PRNewswire-Asia-FirstCall/ -- On November 10, 2011, China Gerui Advanced Materials Group Limited (NASDAQ: CHOP) ("China Gerui," or the "Company") issued a press release regarding its third fiscal quarter of 2011. After further discussion with the Company's independent registered public accounting firm, certain items relating to the Company's financial statements have been reclassified. On the Consolidated Balance Sheets, the "Other Receivables" line item had formerly included $5 million which was attributable to a potential joint venture between the Company and a prospective partner. These funds were deposited in a separate bank account by a related party for this purpose. We have adjusted the presentation of these funds and they are now categorized in the line item "Deposit Potential Business Initiatives Program-Related Party". We have also adjusted the Consolidated Statements of Cash Flows to properly classify these funds. The original press release follows with corrected information in the financial statements and body of the press release indicated by bold italicized text. Other than the noted changes, the financial results from the November 10, 2011 press release remain otherwise unchanged.

China Gerui Advanced Materials Group Limited Announces Record Third Quarter 2011 Results

ZHENGZHOU, China - November 10, 2011 - China Gerui Advanced Materials Group Limited (NASDAQ: CHOP) ("China Gerui," or the "Company"), a leading high precision, cold-rolled strip steel producer in China, today announced unaudited financial results for the three and nine months ended September 30, 2011.

"We achieved a record increase in revenues in the third quarter and a substantial increase in operating profits resulting from our ability to meet further customer demand from the utilization of our new production capacities," said Mr. Mingwang Lu, Chairman and Chief Executive Officer. "Our third quarter saw a ramp-up in the utilization of our 400,000 tons of annual specialized steel production capacity, which included a substantial revenue contribution from our much-anticipated new wide-strip production line capable of annual volume of 150,000 tons. We are experiencing continued robust demand for both narrow and wide-strip cold-rolled steel products in China across a variety of industries. We believe that our new large-scale chromium-plating capacity and precision wide-strip cold-rolled steel products will enable an expansion in our operating margins in the quarters ahead."

"The final phase of our expansion plan will result in an additional 100,000 tons of cold-rolled steel per year by the fourth quarter of 2011," Mr. Lu continued. "The addition of wide-strip production lines and chromium plating capacity better diversifies our capabilities which will enable us to optimize our production mix. We plan to continue to capitalize upon our competitive advantage to meet the strong demand of the high growth domestic China market place."

Third Quarter 2011 Results

Revenue increased 63.4% to $101.1 million in the third quarter of 2011 from $61.9 million in the third quarter of 2010. The increase in revenue was primarily due to both a 25.5% increase in the Company's average selling price to $1,044 per ton for the third quarter of 2011 compared to $832 per ton for the same period of 2010, and an 30.7% increase in sales volume to approximately 97,185 tons for the third quarter of 2011 as compared to approximately 74,384 tons for the same period of 2010.

Gross profit increased 72.7% to $32.1 million in the third quarter of 2011 from $18.6 million in the same period of 2010. Gross margin was 31.7% in the third quarter of 2011 compared to 30.0% in the same period of 2010. The increase in gross margin was due to the increase in utilization of both the new 150,000-ton wide-strip production line and the 200,000 tons in new chromium-plating capacity that were both added during the previous quarter.

Operating income increased 74.5% to $28.7 million in the third quarter of 2011, or 28.4% of revenue, from $16.5 million, or 26.6% of revenue in the same period of 2010. The increase in operating margin is due to the increase in revenue from the aforementioned ramp-up in utilization of the two new production line capacities.

Interest expenses decreased 42.9% to $0.6 million compared to $1.1 million in the prior year period. The decrease in interest expenses was due to management's continued efforts to reduce leverage to solidify its balance sheet.

Net income increased 76.2% to $21.4 million in the third quarter of 2011 from $12.1 million in the same period of 2010. Net income per diluted share in the third quarter of 2011 increased to $0.37 from $0.25 per diluted share in the same period of 2010, which factors in the significant increase of number of shares outstanding from the warrants exercised by March 21, 2011.

Adjusted EBITDA increased 80.0% to $31.6 million, or 31.3% of revenue, from $17.6 million, or 28.4% of revenue, in the same period of 2010. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and one-time warrant exercise expenses incurred in the first quarter of 2011. The tables that follow this press release also include a presentation for adjusted EBITDA*.

Nine Months 2011 Results

Revenue increased 33.1% to $249.8 million for the first nine months ended September 30, 2011, from $187.7 million in the first nine months of 2010. The increase in revenue was primarily due to both a 18.5% increase in the Company's average selling price to $992 per ton for the nine months of 2011 compared to $837 per ton for the same period of 2010, and a 12.2% increase in sales volume to approximately 251,752 tons for the nine months ended September 30, 2011 as compared to approximately 224,292 tons for the same period of 2010.

Gross profit increased 30.6% to $73.6 million in the nine months ended September 30, 2011 from $56.4 million in the same period of 2010. Gross margin was 29.5% in the first nine months of 2011 compared to 30.0% in the same period of 2010. The slight decrease in gross margin was due to increased raw material costs incurred due to the testing of both the new chromium-plating line during the first nine months of 2011 and the new 150,000-ton wide-strip production line during the first nine months of the year. Raw materials used for testing purposes were included in the cost of goods sold.

Operating income increased 18.9% to $59.6 million in the nine months ended September 30, 2011 from $50.1 million in the same period in 2010. Operating margin was 23.9% in the first nine months of 2011 compared to 26.7% of revenue in the same period of 2010. The decrease in operating margin is due to the aforementioned gross margin decrease and a one-time warrant exercise expense of $5.7 million. Adjusted operating income, which excludes the aforementioned one-time warrant exercise expense, increased 30.4% to $65.3 million, or 26.1% of revenue, as compared to $50.1 million, or 26.7% of revenue. *

Interest expenses increased 56.7% for the first nine months of 2011 to $5.4 million compared to $3.5 million in the prior comparable period. The increase in interest expenses was due to an increased use of bank facilities in 2011.

Net income increased 10.3% to $39.4 million for the first nine months of 2011 from $35.7 million in the same period of 2010. Net income per diluted share for the first nine months of 2011 decreased to $0.71 from $0.77 per diluted share in the same period of 2010, which is primarily due to the increased number of shares outstanding from the warrants exercised by March 21, 2011.

Adjusted EBITDA increased 33.7% to $70.6 million for the first nine months of 2011, or 28.3% of revenue, from $52.9 million, or 28.2% of revenue, in the same period of 2010. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and one-time warrant exercise expenses incurred in the first quarter of 2011. The tables that follow this press release also include a presentation for adjusted EBITDA*.

Financial Condition

As of September 30, 2011, the Company had $224.9 million in unrestricted cash and an additional $104.1 million in restricted cash, as compared to $119.5 million and $66.5 million, respectively, as of December 31, 2010. Working capital was $134.8 million as of September 30, 2011, compared to $66.7 million at the end of 2010. The Company's short-term debt consisted of notes payable and term loans that totaled $216.2 million as of September 30, 2011, compared to $130.3 million at the end of 2010. Company has no long-term debt. Shareholders' equity was $276.9 million, as compared to $167.8 million at the end of 2010. The net cash provided by operating activities for the first nine months of 2011 was $47.9 million compared to net cash provided by operating activities of $19.0 million in the same period of 2010.

Recent Developments

Management acknowledges the recent challenging sentiment toward U.S. listed companies based in China and has taken the following steps to foster investor confidence in China Gerui and enhance transparency:

    --  In April 2011, the Company announced that its Board of Directors
        approved the repurchase of up to an aggregate of $10 million of its
        ordinary shares.  As of September 30, 2011, the Company had repurchased
        1,122,752 ordinary shares at an average price of $3.85 per share for a
        total repurchase price of approximately $4.32 million.
    --  The Company will participate in the upcoming investor events later this
        month:
    The Cowen and Company China Opportunity Conference
    --------------------------------------------------
    Date:                      November 15, 2011
    Location:                  Beijing

    Dahlman Rose & Co. 3rd Annual Global Metals, Mining and Materials
     Conference
    -----------------------------------------------------------------
    Date:                      November 17, 2011
    Location:                  New York

    The China Gerui-Sponsored "Fireside Chat"
    -----------------------------------------
    Date:                       November 18, 2011,
                                12:00 pm
    Location:                   New York, 300
                                Madison Avenue, 3rd
                                Floor
    Dial-In:                    For US and Canadian callers: (877)
                                850-5643
                                For International callers:        (404)
                                602-0888
                                Please dial-in 5-10 minutes prior to the
                                event time and provide the conference
                                code 5461705379.

    Investors who wish to attend any of these events may contact the Company's
     investor relations U.S. representative, Vivian Chen, at
     vivian.chen@ccgir.com or +1 (310) 926-8038.

"Our active participation in investor conferences as well as our having initiated an opportunity for extended outreach is intended to strengthen our relationship and enhance transparency with investors as well as reinforce our commitment to maximizing long-term shareholder value," said Chairman Lu.

Business Outlook

The Company's capacity expansion plan is being implemented in two phases. Phase I involved the construction of two new cold-rolled, wide-strip steel production lines with 150,000 tons of total annual capacity and a new chromium plating production line capable of processing an additional 200,000 tons of cold-rolled steel per year. These lines began normal operations as of July 2011. Phase II of the expansion plan involves the addition of 100,000 tons of cold-rolled steel production capacity per year by the first quarter of 2012.

Completion of Phase II of the Company's capacity expansion plan will raise the Company's total annual production capacity to a total of 500,000 tons of specialized steel of both wide- and narrow-strip cold-rolled steel production. The Company's chromium plating production lines are fully operational and can accommodate a total of 250,000 tons of either narrow-strip or wide-strip specialized steel. The Company expects an estimated 75% capacity utilization rate for the recently added 150,000 tons of annual wide-strip steel production capacity by the end of 2011.

Mr. Lu concluded, "The results of the Company's capacity expansion plan, as can be seen both in the third quarter and year-to-date results as well as the compelling year-to-year comparisons, is a result of the effective execution of our strategic growth plan. We expect to experience margin improvements from our additional capacity through the remainder of 2011 as our value-added capabilities enable us to service an increasing number of industry sectors."

For fiscal year 2011, China Gerui will maintain guidance of revenue between $330 million and $345 million, gross profit of between $115 million and $120 million, adjusted net income* of between $70 million and $75 million, and adjusted diluted earnings per share* of between $1.20 and $1.25.

(*) Adjusted operating income, adjusted net income, adjusted net income per diluted share, and adjusted EBITDA represent non-GAAP (United States Generally Accepted Accounting Principles) financial measures. See the tables following this press release for a reconciliation of these measures to the appropriate GAAP measures.

Conference Call Information

The Company will also host a conference call at 8:30 am ET on Thursday, November 10, 2011.( )

Listeners may access the call by dialing +1 (866) 395-5819 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (706) 643-6986. The conference participant pass code is 23266724.

A replay of the conference call will be available for 14 days starting from 11:30 am ET on Thursday, November 10, 2011. To access the replay, dial +1 (855) 859-2056. International callers should dial +1 (404) 537-3406. The passcode is 23266724.

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.

Use of Adjusted Financial Measures

This earnings release includes the use of adjusted operating income, adjusted net income, adjusted net income per share, adjusted EBITDA, which are financial measures that are not defined by US 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 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. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has included with this press release a table which includes a reconciliation of adjusted operating income, adjusted net income and adjusted net income per diluted share to net income and adjusted EBITDA to net income, the most directly comparable GAAP financial measures, respectively. Adjusted EBITDA was defined as earnings before interest, taxes, depreciation, amortization and one-time warrant exercise expenses incurred in the first quarter of 2011. Adjusted operating income, adjusted net income and adjusted net income per diluted share were calculated by excluding one-time warrant exercise expenses of $5.7 million from operating income, net income, and net income per diluted share, respectively. 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 adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted net income per diluted share 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 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 annual report on Form 20-F for the year ended December 31, 2010 and otherwise in our SEC reports and filings, including the final prospectus for our offering. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, 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:                Investor Relations Contact:
    Email: investors@geruigroup.com CCG Investor Relations
    Website: www.geruigroup.com     David Rudnick
                                    Phone: 1-646-626-4172
                                    Email: david.rudnick@ccgir.com

Financial tables to follow

    CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (IN US DOLLARS)

                                                                             September 30, 2011               December 31, 2010
                                                                             ------------------               -----------------
                                                                                (Unaudited)
    Assets

    Current assets
        Cash                                                                                    $224,875,795                    $119,477,298
        Restricted cash                                                                          104,148,635                      66,530,303
        Accounts receivable, net                                                                   2,375,215                       4,087,086
        Inventories                                                                               13,347,230                       7,002,277
        Prepaid expenses and other deposits                                                       58,859,730                      28,749,680
        Deposit- potential business initiatives program-related party                              5,000,000                               -
        Other receivables                                                                            975,012                       2,068,082

    Total current assets                                                                         409,581,617                     227,914,726
                                                                                                 -----------                     -----------

    Non-current assets
        Property, plant and equipment, net                                                       115,781,006                      85,489,849
        Land use right, net                                                                       13,697,273                      13,455,218
        Deposit on acquisition of future land use right                                           12,543,116                       2,143,939

    Total non-current assets                                                                     142,021,395                     101,089,006
    Total assets                                                                                $551,603,012                    $329,003,732
                                                                                                ============                    ============

    Liabilities and stockholders' equity

    Current Liabilities
        Accounts payable                                                                         $12,209,969                      $2,650,689
        Notes payable                                                                            175,644,402                      86,227,272
        Term loans                                                                                40,529,946                      44,090,909
        Land use right payable                                                                     1,386,401                      10,203,404
        Income tax payable                                                                         6,979,183                       4,151,665
        Customers deposits                                                                        26,356,768                       9,686,444
        Accrued liabilities and other payables                                                    11,638,539                       4,181,347
                                                                                                  ----------                       ---------
    Total current liabilities                                                                    274,745,208                     161,191,730
                                                                                                 -----------                     -----------
    Total liabilities                                                                            274,745,208                     161,191,730
                                                                                                 -----------                     -----------


    Stockholders' equity

    Common stock,
        Common stock, 100,000,000 shares authorized with no par value;
             59,428,578  and  46,139,053 shares issued,
             58,305,826 and 46,139,053 shares outstanding as of
            September 30, 2011 and December 31, 2010, respectively                               140,418,118                      73,944,243
        Additional paid-in capital                                                                 6,930,944                       6,930,944
        Treasury stock, at cost, 1,122,752 shares, as of September 30, 2011,
            none as of December 31, 2010                                                          (4,319,777)                              -
        Retained earnings                                                                        118,951,361                      79,522,406
        Accumulated other comprehensive income                                                    14,877,158                       7,414,409
                                                                                                  ----------                       ---------

    Total stockholders' equity                                                                   276,857,804                     167,812,002
                                                                                                 -----------                     -----------

    Total liabilities and stockholders' equity                                                  $551,603,012                    $329,003,732
                                                                                                ============                    ============

    CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
    CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
    (IN US DOLLARS)
                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                  For the Three Months      For the Nine Months
                                                                                                                                                                                                                                                  Ended September 30,        Ended September 30,
                                                                                                                                                                                                                                                  -------------------       -------------------
                                                                                                                                                                                                                                                                  2011                      2010              2011              2010
                                                                                                                                                                                                                                                                                                                                      
     Revenue                                                                                                                                                                                                                                              $101,073,420               $61,862,286      $249,840,832      $187,724,365
                                                                                                                                                                                                                                                                                                                                      
     Cost of revenue                                                                                                                                                                                                                                       (69,018,246)              (43,299,966)    (176,248,246)     (131,368,669)
                                                                                                                                                                                                                                                           -----------               -----------      ------------      ------------
                                                                                                                                                                                                                                                                                                                                      
     Gross Profit                                                                                                                                                                                                                                           32,055,174                18,562,320        73,592,586        56,355,696
                                                                                                                                                                                                                                                                                                                                      
     Operating expenses:
         General and administrative expenses                                                                                                                                                                                                                (2,750,140)               (1,866,067)       (7,143,095)       (5,373,275)
         Selling and marketing expenses                                                                                                                                                                                                                       (602,364)                 (245,156)       (1,161,862)         (880,707)
         Warrant compensation expenses                                                                                                                                                                                                                               -                         -        (5,700,000)                -
                                                                                                                                                                                                                                                                   ---                       ---
     Total operating expenses                                                                                                                                                                                                                               (3,352,504)               (2,111,223)      (14,004,957)       (6,253,982)
                                                                                                                                                                                                                                                            ----------                ----------       -----------        ----------
                                                                                                                                                                                                                                                                                                                                      
     Operating income                                                                                                                                                                                                                                       28,702,670                16,451,097        59,587,629        50,101,714
                                                                                                                                                                                                                                                            ----------                ----------        ----------        ----------
                                                                                                                                                                                                                                                                                                                                      
     Other income and (expense):
         Interest income                                                                                                                                                                                                                                       425,824                   274,446         1,371,553           653,927
         Interest expenses                                                                                                                                                                                                                                    (621,145)               (1,087,227)       (5,430,551)       (3,465,010)
         Sundry income                                                                                                                                                                                                                                         401,884                   183,728           442,936           268,726
                                                                                                                                                                                                                                                               -------                   -------           -------           -------
                                                                                                                                                                                                                                                                                                                                      
    Income before income taxes                                                                                                                                                                                                                              28,909,233                15,822,044        55,971,567        47,559,357
                                                                                                                                                                                                                                                                                                                                      
    Income tax expense                                                                                                                                                                                                                                      (7,518,632)               (3,685,197)      (16,542,612)      (11,817,382)
                                                                                                                                                                                                                                                                                                                                      
    Net income                                                                                                                                                                                                                                             $21,390,601               $12,136,847       $39,428,955       $35,741,975
                                                                                                                                                                                                                                                           ===========               ===========       ===========       ===========
                                                                                                                                                                                                                                                                                                                                      
    Earnings per share
        - Basic                                                                                                                                                                                                                                                  $0.37                     $0.27             $0.71             $0.83
                                                                                                                                                                                                                                                                 -----                     -----             -----             -----
                                                                                                                                                                                                                                                                                                                                      
        - Diluted                                                                                                                                                                                                                                                $0.37                     $0.25             $0.71             $0.77
                                                                                                                                                                                                                                                                 -----                     -----             -----             -----
                                                                                                                                                                                                                                                                                                                                      
        Weighted average common shares
     outstanding
        - Basic                                                                                                                                                                                                                                             58,428,146                45,425,681        55,623,129        43,292,881
                                                                                                                                                                                                                                                            ----------                ----------        ----------        ----------
                                                                                                                                                                                                                                                                                                                                      
        - Diluted                                                                                                                                                                                                                                           58,428,146                48,458,492        55,623,129        46,325,692
                                                                                                                                                                                                                                                            ----------                ----------        ----------        ----------

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

                                                                                                                                                                                                                             For The Nine Months
                                                                                                                                                                                                                              Ended September 30,
                                                                                                                                                                                                                             -------------------
                                                                                                                                                                                                                                                      2011                  2010
    Cash flows from operating activities:
                                                                                                                                                                                                                                                                                  
    Net income                                                                                                                                                                                                                                 $39,428,955           $35,741,975
                                                                                                                                                                                                                                                                                  
    Adjustments to reconcile net income to net
        cash provided by operating activities:
    Depreciation of property, plant and equipment                                                                                                                                                                                                4,689,078             2,300,301
    Amortization of land use right                                                                                                                                                                                                                 240,661              182,150
                                                                                                                                                                                                                                                                                 
    Changes in assets and liabilities:
    Accounts receivable, net                                                                                                                                                                                                                     1,824,157              627,969
    Inventories                                                                                                                                                                                                                                 (6,002,591)            (989,077)
    Prepaid expenses and other deposits                                                                                                                                                                                                        (28,640,585)        (16,682,156)
    Other receivables                                                                                                                                                                                                                            1,121,774              372,427
    Accounts payable                                                                                                                                                                                                                             9,313,975           (3,362,275)
    Income tax payable                                                                                                                                                                                                                           2,639,637              (97,805)
    Customers deposit                                                                                                                                                                                                                           16,069,127              107,192
    Accrued liabilities and other payables                                                                                                                                                                                                       7,193,894              772,275
                                                                                                                                                                                                                                                 ---------              -------
                                                                                                                                                                                                                                                                                 
    Net cash provided by operating activities                                                                                                                                                                                                   47,878,082           18,972,976
                                                                                                                                                                                                                                                ----------           ----------
                                                                                                                                                                                                                                                                                 
    Cash flows from investing activities:
    Cash paid for property, plant and equipment                                                                                                                                                                                                (30,912,597)        (63,337,786)
    Payment of purchases of land use right                                                                                                                                                                                                      (9,023,879)          (1,161,532)
    Payment of acquisition of future land use right                                                                                                                                                                                            (10,157,648)          (1,787,159)
    Deposit- potential business initiatives program-related party                                                                                                                                                                               (5,000,000)                   -
    Changes in restricted cash                                                                                                                                                                                                                 (34,731,906)        (35,597,837)
    Changes in prepaid machinery deposits                                                                                                                                                                                                                -           13,973,966
                                                                                                                                                                                                                                                       ---           ----------
                                                                                                                                                                                                                                                                                 
    Net cash used in investing activities                                                                                                                                                                                                      (89,826,030)        (87,910,348)
                                                                                                                                                                                                                                               -----------          -----------
                                                                                                                                                                                                                                                                                 
    Cash flows from financing activities:
    Repayment of term loans                                                                                                                                                                                                                    (24,290,245)        (22,268,054)
    Proceeds from term loans                                                                                                                                                                                                                    12,457,400           45,001,623
    Proceeds from notes payable, net                                                                                                                                                                                                            85,018,819           50,016,387
    Proceeds received from exercise of warrants                                                                                                                                                                                                 66,473,875           25,436,393
    Purchase of treasury stock                                                                                                                                                                                                                  (4,319,777)                   -
                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                 
    Net cash provided by financing activities                                                                                                                                                                                                  135,340,072           98,186,349
                                                                                                                                                                                                                                               -----------           ----------
                                                                                                                                                                                                                                                                                 
    Net increase in cash                                                                                                                                                                                                                        93,392,124           29,248,977
                                                                                                                                                                                                                                                                                 
    Effect on change of exchange rates                                                                                                                                                                                                          12,006,373            1,848,948
                                                                                                                                                                                                                                                                                 
    Cash as of January 1,                                                                                                                                                                                                                      119,477,298           79,607,369
                                                                                                                                                                                                                                               -----------           ----------
                                                                                                                                                                                                                                                                                 
    Cash as of September 30,                                                                                                                                                                                                                  $224,875,795         $110,705,294
                                                                                                                                                                                                                                              ============         ============
                                                                                                                                                                                                                                                                                 
    Supplemental disclosures of cash flow information:
                                                                                                                                                                                                                                                                                 
    Cash paid during the period for:
                                                         Interest paid                                                                                                                                 $5,215,902                                           $3,465,010
                                                         Income tax paid                                                                                                                              $13,902,975                                           $11,989,894
    Non-cash paid during the period for:
                                                          Acquisition of land use rights with issuance of
                                                          promissory note                                                                                $              -                             $10,811,583

    CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
    RECONCILIATION OF NON-GAAP FINANCIAL DATA
    (IN US DOLLARS)
     (UNAUDITED)


                                                        Non GAAP Operating Income
                                                 Three Months Ended Sept. 30      Nine Months Ended Sept. 30
                                                                         2011                            2010        2011        2010
                                                                         ----                            ----        ----        ----

     GAAP amount per
      consolidated
     statement of income                                           28,702,670                      16,451,097  59,587,629  50,101,714
     One-time warrant
      exercise expenses                                                     -                               -   5,700,000           -
     Non GAAP Adjusted
      Operating Income                                             28,702,670                      16,451,097  65,287,629  50,101,714
     -----------------                                             ----------                      ----------  ----------  ----------


                                                         Non GAAP Net Income
                                                 Three Months Ended Sept. 30      Nine Months Ended Sept. 30
                                                                         2011                            2010        2011        2010
                                                                         ----                            ----        ----        ----
     GAAP amount per
      consolidated
     statement of income                                           21,390,601                      12,136,847  39,428,955  35,741,975
     One-time warrant
      exercise expenses                                                     -                               -   5,700,000           -
     Adjusted Amount                                               21,390,601                      12,136,847  45,128,955  35,741,975
     ---------------                                               ----------                      ----------  ----------  ----------

     Weighted average
      shares -diluted                                              58,428,146                      48,458,492  55,623,129  46,325,692

     GAAP diluted
      earnings per share                                                 0.37                            0.25        0.71        0.77
     Non GAAP Adjusted
      diluted earnings
      per share                                                          0.37                            0.25        0.81        0.77
     -----------------                                                   ----                            ----        ----        ----


                                                       Non GAAP Adjusted EBITDA
                                                 Three Months Ended Sept. 30      Nine Months Ended Sept. 30
                                                                         2011                            2010        2011        2010
                                                                         ----                            ----        ----        ----
     GAAP amount per
      consolidated
      statement of income                                          21,390,601                      12,136,847  39,428,955  35,741,975
     One-time warrant
      exercise expenses                                                     -                               -   5,700,000           -
     Interest income                                                 (425,824)                       (274,446) (1,371,553)   (653,927)
     Interest expenses                                                621,145                       1,087,227   5,430,551   3,465,010
     Income tax expense                                             7,518,632                       3,685,197  16,542,612  11,817,382
     Depreciation of
      property, plant
      and equipment                                                 2,415,803                         842,185   4,689,078   2,300,301
     Amortization of
      land use right                                                   81,273                          76,153     240,661     182,150
     Non GAAP Adjusted
      EBITDA                                                       31,601,630                      17,553,163  70,660,305  52,852,891
     -----------------                                             ----------                      ----------  ----------  ----------

SOURCE China Gerui Advanced Materials Group Limited

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