General Steel Files 2011 Annual Report on Form 10-K Company Expects to Regain Compliance with NYSE Annual Report Listing Requirements

Receives Unqualified Opinion from Auditor

BEIJING, Feb. 15, 2013 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced that it has filed its Annual Report on Form 10-K for the year ended December 31, 2011 with the U.S. Securities and Exchange Commission (the "SEC"). The Company's independent registered public accounting firm, Friedman LLP has expressed an unqualified audit opinion on the Company's annual financial statement for the 12 months ended December 31, 2011.

With the filing of this Annual Report on Form 10-K, the Company believes it has met the New York Stock Exchange's ("NYSE") extended deadline and expects to regain compliance with the NYSE's continued listing requirement for annual report filings under Section 802.01E of the NYSE Listed Company Manual.

"The filing of our 2011 Annual Report demonstrates our commitment to proper financial reporting, and is the result of a concerted effort by our finance team and audit firm partners. Although the review and audit process for our 2011 financial statements took much longer than originally anticipated, we are pleased that we will regain compliance with the NYSE's Annual Report listing requirements," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "Moving ahead, we will continue to focus on our business while we work diligently to prepare our 2012 financial statements and bring General Steel fully current in its SEC filing obligations. Again, I would like to thank our team for their tremendous work and dedication to completing this process, as well as our shareholders for their ongoing support of the Company."

Full Year 2011 Financial Review

  • Total crude steel production capacity under management was 7.0 million metric tons per annum as of December 31, 2011.
  • Total sales increased 89.4% year-over-year to $3.6 billion, from $1.9 billion in 2010. The increase was attributable to both higher sales volume and increased average selling prices.
  • Sales volume for the year totaled 6.2 million metric tons, an increase of 2.3 million metric tons, or 58.1%, compared to 3.9 million metric tons in 2010, with an average selling price for rebar of $635 per ton in 2011, compared to $526 per ton in 2010.
  • Gross loss was $(88.2) million, representing a gross margin of (2.5)%, compared with gross profit of $31.4 million, or a gross margin of 1.7% in 2010. The gross loss in 2011 was mainly attributable to a sharp increase in the cost of iron ore and coke, the Company's primary raw materials, in the fourth quarter.
  • Selling, general and administrative expenses totaled $91.8 million, compared with $52.6 million in 2010. This increase was mainly related to operational expansion and an increase in production and shipping volume, which led to an increase in transportation and sales agent charges.
  • Loss from operations totaled $(180.0) million, compared with a loss from operations of $(21.2) million in 2010.
  • Finance expenses for the year ended December 31, 2011 increased to $115.0 million, compared with $51.3 million in the year-ago period. The increase was primarily due to $27.7 million of non-cash capital financing costs, and a $36.0 million increase in interest expense from increased bank borrowings.
  • Net loss attributable to the Company was $(177.2) million, or $(3.24) per diluted share, compared with a net loss of $(30.0) million, or $(0.56) per diluted share in 2010. The year-over-year increase in net loss was primarily related to the negative gross margin resulting from the fourth quarter raw material price increases, an increase of $36.4 million in inventory impairment, an increase of $39.3 million in operating expenses from expanded operations and higher production and shipping volume, as well as an increase of $63.7 million in finance expenses from increased capital lease and interest expense on bank borrowings.  In addition, the Company determined that the net operating loss carryforward may not have been fully realizable in the second quarter of 2011 and provided 100% allowance charges of $15.4 of deferred tax assets carried over from 2010.

Fourth Quarter 2011 Financial Review

  • Total sales increased 69.9% year-over-year to $793.5 million, compared with $467.2 million in the fourth quarter of 2010. The increase was attributable to both higher sales volume and increased average selling prices.
  • Sales volume for the fourth quarter of 2011 totaled 1.6 million metric tons, an increase of 0.7 million metric tons, or 77.8%, compared to 0.9 million metric tons in the fourth quarter of 2010.
  • Gross loss was $(150.7) million, representing a gross margin loss of (19.0)%, compared with gross profit of $4.7 million, or a gross margin of 1.0% in the fourth quarter of 2010. The gross loss in the fourth quarter of 2011 was mainly attributable to a year-over-year increase in the cost of iron ore and coke, the Company's primary raw materials, that exceeded the increase in the average selling price of the Company's products.
  • Selling, general and administrative expenses totaled $26.0 million, compared with $17.2 million in the fourth quarter of 2010. This increase was mainly related to operational expansion and increased production and shipping volume, which led to an increase in transportation and sales agent charges.
  • Loss from operations totaled $(176.6) million, compared with a loss from operations of $(12.5) million in the fourth quarter of 2010.
  • Finance expenses for the quarter ended December 31, 2011 increased to $42.6 million, compared with $13.7 million in the year-ago period. The increase was primarily related to $18.6 million of non-cash capital financing costs, and a $10.4 million increase in interest expense from increased bank borrowings.
  • Net loss attributable to the Company was $(131.5) million, or $(2.38) per diluted share, compared with a net loss of $(18.6) million, or $(0.34) per diluted share in the fourth quarter of 2010. The year-over-year increase in net loss was primarily related to the negative gross margin resulting from raw material price increases, as well as an increase of $36.4 million in inventory impairment, an increase of $8.8 million in operating expenses from expanded operations and higher production and shipping volume and an increase of $29.0 million in finance expenses from increased capital lease and interest expense on bank borrowings.

Balance Sheet

As of December 31, 2011, General Steel had cash and restricted cash of approximately $518.2 million, compared to $263.1 million as of December 31, 2010. The Company had an inventory balance of approximately $297.7 million as of December 31, 2011, compared to $453.6 million as of December 31, 2010. As of December 31, 2011, the Company had total liabilities of approximately $3.2 billion, compared to $1.7 billion as of December 31, 2010.

About General Steel Holdings, Inc.

General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 7 million metric tons of crude steel production capacity under management, its subsidiaries serve various industries and produce a variety of steel products including rebar, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit www.gshi-steel.com.

To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company's Annual Report on Form 10-K, please send your request to generalsteel@tpg-ir.com.

Forward-Looking Statements

This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Actual results could differ materially from those projected in the forward-looking statements as a result of inaccurate assumptions or a number of risks and uncertainties. These risks and uncertainties are set forth in the Company's filings under the Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and elsewhere, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill its primary requirements for cash; and (e) other risks, including those disclosed in the Company's Form 10-K, filed with the SEC. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.

Contact Us




General Steel Holdings, Inc.


In China:

In the US:

Jenny Wang

Joyce Sung

Tel: +86-10-5775-7691

Tel: +1-347-534-1435

Email: jenny.wang@gshi-steel.com 

Email:  joyce.sung@gshi-steel.com




The Piacente Group, Inc.


Investor Relations


Brandi Floberg or Lee Roth


Tel: +1-212-481-2050


Email: generalsteel@tpg-ir.com









GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)









ASSETS


 

As of December 31,






2011


2010

CURRENT ASSETS:






 Cash

$

120,016

$

65,271


 Restricted cash


398,216


197,797


 Notes receivable


92,910


49,147


 Restricted notes receivable


584,241


240,298


 Accounts receivable, net


12,601


18,500


 Accounts receivable - related parties


20,593


4,160


 Other receivables, net


22,411


11,150


 Other receivables - related parties


87,679


10,938


 Inventories


297,729


453,636


 Advances on inventory purchase


63,585


24,577


 Advances on inventory purchase - related parties


20,244


6,187


 Prepaid expense


364


5,018


 Prepaid value added tax


24,189


37,323


 Short-term investment


2,906


-


 Deferred tax assets


167


15,301



 TOTAL CURRENT ASSETS


1,747,851


1,139,303









 PLANT AND EQUIPMENT, net


1,257,236


602,612









 OTHER ASSETS:






 Advances on equipment purchase


10,420


14,898


 Investment in unconsolidated entities


12,840


17,456


 Long-term deferred expense


631


1,439


 Intangible assets, net of accumulated amortization


25,143


23,672



 TOTAL OTHER ASSETS


49,034


57,465












 TOTAL ASSETS

$

3,054,121

$

1,799,380









 LIABILITIES AND EQUITY













 CURRENT LIABILITIES:






 Short term notes payable

$

1,113,504

$

480,152


 Accounts payable


413,345


241,367


 Accounts payable - related parties


121,828


79,694


 Short term loans - bank


253,954


285,198


 Short term loans - others


246,657


127,712


 Short term loans - related parties


15,710


14,548


 Other payables and accrued liabilities


49,538


30,087


 Other payable - related parties


28,873


18,214


 Customer deposit


90,556


133,464


 Customer deposit - related parties


68,277


54,922


 Deposit due to sales representatives


22,890


51,624


 Deposit due to sales representatives - related parties


943


455


 Taxes payable


11,374


6,237


 Deferred lease income, current


2,099


1,971


 Capital lease obligations, current


25,607


-



 TOTAL CURRENT LIABILITIES


2,465,155


1,525,645









 NON-CURRENT LIABILITIES:






 Long-term loans - related party


92,035


91,020


 Deferred lease income, noncurrent


76,425


55,620


 Capital lease obligations, noncurrent


280,743


-


 Profit sharing liability, noncurrent


303,233


-



 TOTAL NON-CURRENT LIABILITIES


752,436


146,640









 DERIVATIVE LIABILITIES


10


5,573












 TOTAL LIABILITIES


3,217,601


1,677,858









 COMMITMENT AND CONTINGENCIES













 EQUITY:                                                                                                                                         






Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares
issued and outstanding as of December 31, 2011 and 2010


3


3


Common Stock, $0.001 par value, 200,000,000 shares authorized, 56,601,988 and
54,678,083 issued, 55,511,010 and 54,522,973 outstanding as of December 31, 2011
and 2010, respectively


56


55


Treasury stock, at cost, 1,090,978 and 316,760 shares as of







December 31, 2011 and 2010, respectively


(2,795)


(871)


 Paid-in-capital


107,940


104,970


 Statutory reserves


6,388


6,202


 Accumulated deficits


(229,083)


(51,793)


 Accumulated other comprehensive income


10,200


10,987



 TOTAL GENERAL STEEL HOLDINGS, INC. EQUITY


(107,291)


69,553









 NONCONTROLLING INTERESTS


(56,189)


51,969











 TOTAL EQUITY


(163,480)


121,522












 TOTAL LIABILITIES AND EQUITY

$

3,054,121

$

1,799,380

 


 







GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(In thousands, except per share data)

 




For the Year Ended

December 31,




2011


2010

SALES


$

2,452,127

$

1,392,770

SALES - RELATED PARTIES



1,111,769


489,370

    TOTAL SALES



3,563,896


1,882,140







COST OF GOODS SOLD



2,519,183


1,369,523

COST OF GOODS SOLD - RELATED PARTIES


1,132,927


481,202

    TOTAL COST OF GOODS SOLD



3,652,110


1,850,725

GROSS PROFIT (LOSS)



(88,214)


31,415

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


91,827


52,577

INCOME (LOSS) FROM OPERATIONS



(180,041)


(21,162)

OTHER INCOME (EXPENSE)






    Interest income



7,892


6,154

    Finance/interest expense



(114,949)


(51,283)

    Change in fair value of derivative liabilities



5,563


15,055

    Gain on debt settlement



3,430


-

    Gain (loss) on disposal of equipment



693


(9,447)

    Realized income from future contracts



415


1,424

    Income from equity investments



5,302


6,383

    Foreign currency transaction gain



3,424


-

    Lease income



2,008


943

    Other non-operating income (expense), net


(1,442)


(3,120)

         Other expense, net



(87,664)


(33,891)

   LOSS BEFORE PROVISION FOR INCOME TAXES AND
NONCONTROLLING INTEREST



(267,705)


(55,053)

PROVISION FOR INCOME TAXES






    Current



175


1,267

    Deferred



15,419


(10,049)

           Provision (benefit) for income taxes



15,594


(8,782)







NET LOSS



(283,299)


(46,271)

Less: Net loss attributable to noncontrolling interest


(106,112)


(16,265)

NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.


$

(177,187)

$

(30,006)

NET LOSS


$

(283,299)

$

(46,271)

OTHER COMPREHENSIVE LOSS






Foreign currency translation adjustments



(587)


4,623

COMPREHENSIVE LOSS



(283,886)


(41,648)

Less: Comprehensive loss attributable to noncontrolling interest



(105,912)


(14,511)

COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.


$

(177,974)

$

(27,137)







WEIGHTED AVERAGE NUMBER OF SHARES





    Basic and Diluted



54,750


53,113

LOSS PER SHARE






    Basic and Diluted


$

(3.24)

$

(0.56)

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010

(UNAUDITED)

(In thousands, except per share data)



For the Three Months Ended

December 31,



2011


2010

SALES

$

473,612

$

351,266

SALES - RELATED PARTIES


319,928


115,895

    TOTAL SALES


793,540


467,161

COST OF GOODS SOLD


588,731


347,671

COST OF GOODS SOLD - RELATED PARTIES


355,462


114,774

    TOTAL COST OF GOODS SOLD


944,193


462,445

GROSS PROFIT (LOSS)


(150,653)


4,716

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES        


25,984


17,204

LOSS FROM OPERATIONS


(176,637)


(12,488)

OTHER INCOME (EXPENSE)





    Interest income


4,812


2,678

    Finance/interest expense


(42,632)


(13,666)

    Change in fair value of derivative liabilities


37


1,476

    Gain on debt settlement


-


-

    Gain (loss) on disposal of equipment


14


(6,323)

    Realized income from future contracts


415


1,424

    Income from equity investments


1,001


2,316

    Foreign currency transaction gain


504


-

    Lease income


519


345

    Other non-operating expense, net


(245)


(6,655)

         Other expense, net


(35,575)


(18,405)

LOSS BEFORE PROVISION FOR INCOME TAXES





    AND NONCONTROLLING INTEREST


(212,212)


(30,893)

PROVISION FOR INCOME TAXES





    Current


(442)


407

    Deferred


35


(4,105)

           Provision (benefit) for income taxes


(407)


(3,698)

NET LOSS


(211,805)


(27,195)

Less: Net loss attributable to noncontrolling interest


(80,280)


(8,589)

NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(131,525)

$

(18,606)

NET LOSS

$

(211,805)

$

(27,195)

OTHER COMPREHENSIVE LOSS





    Foreign currency translation adjustments


(2,986)


1,177

COMPREHENSIVE LOSS


(214,791)


(26,018)

Less: Comprehensive loss attributable to noncontrolling interest


(80,395)


(8,032)

COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(134,396)

$

(17,986)

WEIGHTED AVERAGE NUMBER OF SHARES





    Basic and Diluted


55,352


54,698

LOSS PER SHARE





    Basic and Diluted

$

(2.38)

$

(0.34)

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(In thousands)




 For the Year Ended December 31,



2011



2,010

CASH FLOWS FROM OPERATING ACTIVITIES:







Net loss

$

(283,299)


$

(46,271)


Adjustments to reconcile net loss to cash provided by (used in)






operating activities:







Depreciation, amortization and depletion


58,331



41,153



Impairment of plant and equipment


5,424



1,747



Change in fair value of derivative liabilities


(5,563)



(15,055)



Gain on debt settlement


(3,430)



-



(Gain) loss on disposal of equipment


(693)



8,257



Bad debt allowance


3,529



326



Inventory written-off


37,512



1,061



Stock issued for services and compensation


1,530



2,479



Income from compensation


-



(1,377)



Make whole shares interest expense on notes conversion


-



1,130



Amortization of deferred note issuance cost and discount on convertible notes


-



17



Amortization of deferred financing cost on capital lease


27,704



-



Income from equity investments


(5,302)



(6,383)



Deferred tax assets


15,419



(10,058)



Deferred lease income


4,782



5,549



Foreign currency transaction gain


(3,424)



-


Changes in operating assets and liabilities








Notes receivable


(41,318)



(18,498)



Notes receivable - restricted


(329,839)



(234,342)



Accounts receivable


4,761



(8,647)



Accounts receivable - related parties


(16,015)



14,065



Other receivables


(12,638)



(3,210)



Other receivables - related parties


(50,562)



(2,968)



Inventories


131,695



(270,046)



Advances on inventory purchases


(37,674)



4,681



Advances on inventory purchases - related parties


(13,608)



13,782



Prepaid expense


4,753



-



Long-term deferred expense


845



-



Prepaid value added tax


14,223



-



Accounts payable


160,657



76,003



Accounts payable - related parties


38,647



45,480



Other payables and accrued liabilities


18,076



(1,527)



Other payables - related parties


9,845



30,618



Customer deposits


(46,870)



(24,433)



Customer deposits - related parties


11,211



18,855



Taxes payable


4,834



(19,543)

Net cash used in operating activities


(296,457)



(397,155)









CASH FLOWS FROM INVESTING ACTIVITIES:







Restricted cash


(190,178)



741


Acquired long term investment


-



(2,021)


Cash proceeds from disposal of long-term investment


-



8,137


Cash made to short term investment


(2,858)



-


Cash proceeds from sales of equipment


1,306



1,828


Advance on equipment purchases


-



(7,106)


Equipment purchase and intangible assets


(110,939)



(89,916)

Net cash used in investing activities


(302,669)



(88,337)








CASH FLOWS FINANCING ACTIVITIES:







Payments made to dividend distribution


-



(2,855)


Payments made for treasury stock acquired


(1,923)



(870)


Capital contributed by noncontrolling interest


-



1,184


Borrowings on short term loans - bank


563,007



327,807


Payments on short term loans - bank


(600,294)



(199,905)


Borrowings on short term loan - others


330,037



152,517


Payments on short term loans - others


(212,661)



(174,913)


Borrowings on short term loan - related parties


15,450



71,714


Payments on short term loans - related parties


(14,817)



(11,850)


Borrowings on short term notes payable


1,655,741



905,124


Payments on short term notes payable


(1,049,680)



(693,633)


Deposits due to sales representatives


(30,066)



987


Deposit due to sales representatives - related parties


464



444


Borrowings on long term loan - related parties


14,677



91,020


Payments on long term loan - related parties


(16,865)



-

Net cash provided by financing activities


653,070



466,771








EFFECTS OF EXCHANGE RATE CHANGE IN CASH


801



1,874








INCREASE (DECREASE) IN CASH


54,745



(16,847)








CASH, beginning of year


65,271



82,118








CASH, end of year

$

120,016


$

65,271

 

SOURCE General Steel Holdings, Inc.



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